Addressing Affordability in the National Flood Insurance Program

22 Pages Posted: 21 Dec 2013

See all articles by Carolyn Kousky

Carolyn Kousky

Resources for the Future

Howard Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department; National Bureau of Economic Research (NBER)

Date Written: December 19, 2013

Abstract

With respect to the pricing of insurance, there is often tension between setting premiums that reflect risk and dealing with equity/affordability issues. The National Flood Insurance Program in the United States has recently shifted toward elimination of certain premium discounts which has raised concerns of affordability of coverage for homeowners. We examine these concerns 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 insurance voucher program, coupled with a loan program for investments in hazard mitigation.

Keywords: NFIP, Biggert–Waters, flood, insurance, means-tested vouchers, hazard mitigation, New Jersey, hurricane, Sandy

JEL Classification: G22, D81, H2, H53, Q54

Suggested Citation

Kousky, Carolyn and Kunreuther, Howard C., Addressing Affordability in the National Flood Insurance Program (December 19, 2013). Available at SSRN: https://ssrn.com/abstract=2370130 or http://dx.doi.org/10.2139/ssrn.2370130

Carolyn Kousky (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Howard C. Kunreuther

University of Pennsylvania - Operations, Information and Decisions Department ( email )

3730 Walnut Street
558 & 559 Jon M. Huntsman Hall
Philadelphia, PA 19104-5340
United States
212-854-0423 (Phone)
215-573-2130 (Fax)

National Bureau of Economic Research (NBER)

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