Free Newsletters - Space - Defense - Environment - Energy - Solar - Nuclear
by Staff Writers
Washington DC (SPX) Jul 22, 2014
There is often tension between setting insurance premiums that reflect risk and dealing with equity/affordability issues. The National Flood Insurance Program (NFIP) 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.
Carolyn Kousky (Resources for the Future, USA) and Howard Kunreuther's (The Wharton School, University of Pennsylvania, USA) paper in the inaugural issue of the Journal of Extreme Events, "Addressing Affordability in the National Flood Insurance Program", examines the tension between risk-based rates and affordability through a case study of Ocean County, New Jersey, an area heavily damaged by Hurricane Sandy.
Kousky and Kunreuther argue that the NFIP must address affordability, but that this should not be done through discounted premiums. Instead, the authors propose a means-tested voucher program coupled with a loan program for investments in hazard mitigation.
As a condition for a voucher, homeowners would be required to take steps to invest in flood loss reduction measures such as elevating their property. They show that that the cost of a program to homeowners and the federal government would be considerably less than if a voucher were just provided to cover the cost of insurance.
Kousky and Kunreuther conclude that a more detailed, nationwide (United States) analysis is needed to estimate the costs to the federal government of a coupled voucher and mitigation loan program, as well as the expected benefits of reduced flooding losses in the future.
This could include an assessment of the amount households could reasonably be expected to pay toward insurance and investing in flood loss reduction measures. Surveys of residents, both in and out of floodplains, regarding their perception of the equity of risk based pricing and insurance vouchers could help inform the public dialogue on the subject.
World Scientific Publishing
Bringing Order To A World Of Disasters
When the Earth Quakes
A world of storm and tempest
|The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. All websites are published in Australia and are solely subject to Australian law and governed by Fair Use principals for news reporting and research purposes. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA news reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement, agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement All images and articles appearing on Space Media Network have been edited or digitally altered in some way. Any requests to remove copyright material will be acted upon in a timely and appropriate manner. Any attempt to extort money from Space Media Network will be ignored and reported to Australian Law Enforcement Agencies as a potential case of financial fraud involving the use of a telephonic carriage device or postal service.|