Date of this Version
Journal of Extreme Events
There is often tension between setting insurance premiums that reflect risk and dealing with equity/affordability issues. The National Flood Insurance Program in the United States recently moved toward elimination of certain premium discounts, but this raised issues with respect to the affordability of coverage for homeowners in flood-prone areas. Ultimately, Congress reversed course and reinstated discounted rates for certain classes of policyholders. We examine the tension between risk-based rates and affordability through a case study of Ocean County, New Jersey, an area heavily damaged by Hurricane Sandy. We argue that the NFIP must address affordability, but that this should not be done through discounted premiums. Instead, we propose a means-tested voucher program coupled with a loan program for investments in hazard mitigation.
Electronic version of an article published as Journal of Extreme Events, Volume 1, Issue 1, 2014, Article 1450001, 10.1142/S2345737614500018 © copyright World Scientific Publishing Company http://dx.doi.org/10.1142/S2345737614500018
National Flood insurance program, affordability, risk-based premiums; ocean county, New Jersey, hurricane (superstorm) sandy
Kousky, C., & Kunreuther, H. (2014). Addressing Affordability in the National Flood Insurance Program. Journal of Extreme Events, 1 (1), 1450001-. http://dx.doi.org/10.1142/S2345737614500018
Date Posted: 27 November 2017
This document has been peer reviewed.