Risk Rating without Information Provision

Philip Mulder and Carolyn Kousky

AEA Papers and Proceedings, 2023, vol. 113, 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.

JEL-codes: D83 G22 G28 Q54 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/pandp.20231102

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