Risk Rating without Information Provision
Philip Mulder, Carolyn Kousky
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.
Topics & Concepts
Flood mythFlood insuranceActuarial scienceAgency (philosophy)Risk managementBusinessInsurance policyFloodplainFinanceGeographyCartographyPhilosophyEpistemologyArchaeologyFlood Risk Assessment and ManagementInsurance and Financial Risk ManagementAgricultural risk and resilience