Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

8-2014

Publication Source

Journal of Extreme Events

Volume

1

Issue

1

Start Page

1450001

DOI

10.1142/S2345737614500018

Abstract

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.

Copyright/Permission Statement

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

Keywords

National Flood insurance program, affordability, risk-based premiums; ocean county, New Jersey, hurricane (superstorm) sandy

Embargo Date

5-23-2015

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Date Posted: 27 November 2017

This document has been peer reviewed.