Risk Rating without Information Provision
AEA Papers and Proceedings
vol. 113,
May 2023
(pp. 299-303)
Abstract
We describe the initial impact of risk-based flood insurance pricing in the United States. More than two-thirds of National Flood Insurance Program policyholders are paying higher premiums under "Risk Rating 2.0" (RR2.0), and increases will continue in the coming years. Premium increases are largest for policyholders classified as low risk on the Federal Emergency Management Agency's (FEMA's) flood maps, and the average premium gap between those in and out of the FEMA-mapped floodplain is narrowing. FEMA's flood maps, which fail to account for the new risk information, are still relied on by homeowners and regulators, blunting the adaptation benefits of RR2.0.Citation
Mulder, Philip, and Carolyn Kousky. 2023. "Risk Rating without Information Provision." AEA Papers and Proceedings, 113: 299-303. DOI: 10.1257/pandp.20231102Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G22 Insurance; Insurance Companies; Actuarial Studies
- G28 Financial Institutions and Services: Government Policy and Regulation
- Q54 Climate; Natural Disasters and Their Management; Global Warming