Flood Insurance Coverage in Dare County: Before and After Floyd
Landry, Craig E.
Dr. Landry started with an overview of how the flood insurance program works. Flooding is a catastrophe risk since flooding events cause multiple losses that are correlated across space; and given the rarity of flooding events, reliable information may not be available to predict likelihood of loss. Government provision for disaster relief can cause a “charity hazard” in that people may opt not to insure. As such, private companies have traditionally exhibited little interest in providing insurance against flooding loss, and the government has stepped in with a public option: the National Flood Insurance Program (NFIP). The program started by creating flood inundation maps and offering subsidized insurance, but most people did not buy it. Then the government made flood insurance mandatory if you had a federally backed mortgage. This has increased participation in NFIP. This study compared 1998 and 2008 flood insurance in Dare County, NC, a vulnerable area. In 1998 many properties did not have flood insurance, but in 2008 more did. There are also more mortgaged properties than ten years ago, and these have higher assessed values and higher amounts covered. Demand for insurance is not responsive to price, so raising or lowering flood insurance prices is not likely to have a large effect on coverage. Since people are required to purchase insurance if they have a mortgage, they don’t have the option not to buy. Demand for flood insurance also increases with income and education level. Insurance coverage is greater for higher value buildings and riskier areas.