The Effect of Flood Exposure on Insurance Adoption Among US Households
Abstract Despite increasing exposure to flooding and associated financial damages, estimates suggest more than two‐thirds of flood‐exposed properties are currently uninsured. This low adoption rate could undermine the climate resilience of communities and weaken the financial solvency of the United...
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| Language: | English |
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Wiley
2024-07-01
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| Series: | Earth's Future |
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| Online Access: | https://doi.org/10.1029/2023EF004110 |
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| author | June Choi Noah S. Diffenbaugh Marshall Burke |
| author_facet | June Choi Noah S. Diffenbaugh Marshall Burke |
| author_sort | June Choi |
| collection | DOAJ |
| description | Abstract Despite increasing exposure to flooding and associated financial damages, estimates suggest more than two‐thirds of flood‐exposed properties are currently uninsured. This low adoption rate could undermine the climate resilience of communities and weaken the financial solvency of the United States National Flood Insurance Program. We study whether repeated exposure to flood events, especially the disaster‐scale floods that are expected to become more frequent in a warming climate, could spur insurance adoption. Using improved estimates of residential insurance take‐up in locations where such insurance is voluntary, and exploiting variation in the frequency and severity of flood events over time, we quantify how flood events impact local insurance demand. We find that a flood disaster declaration in a given year increases the take‐up rate of insurance by 7% in the following year, but that the effect diminishes in subsequent years and is gone after 5 years. This effect is more short‐lived in counties in inland states that do not border the Gulf and Atlantic coasts. We also find that the effect of a flood on take‐up is substantially larger if there was also a flood in the previous year, and that recent disasters are more salient for homeowners whose primary residences are exposed to a disaster declaration compared to non‐primary residences. Overall, these findings suggest that relying on households to self‐adapt to increasing flood risks in a changing climate is insufficient for closing the insurance protection gap. |
| format | Article |
| id | doaj-art-40541d7f78f5478589806c50dde6cf2d |
| institution | Kabale University |
| issn | 2328-4277 |
| language | English |
| publishDate | 2024-07-01 |
| publisher | Wiley |
| record_format | Article |
| series | Earth's Future |
| spelling | doaj-art-40541d7f78f5478589806c50dde6cf2d2025-01-29T07:58:52ZengWileyEarth's Future2328-42772024-07-01127n/an/a10.1029/2023EF004110The Effect of Flood Exposure on Insurance Adoption Among US HouseholdsJune Choi0Noah S. Diffenbaugh1Marshall Burke2Doerr School of Sustainability Stanford University Stanford CA USADoerr School of Sustainability Stanford University Stanford CA USADoerr School of Sustainability Stanford University Stanford CA USAAbstract Despite increasing exposure to flooding and associated financial damages, estimates suggest more than two‐thirds of flood‐exposed properties are currently uninsured. This low adoption rate could undermine the climate resilience of communities and weaken the financial solvency of the United States National Flood Insurance Program. We study whether repeated exposure to flood events, especially the disaster‐scale floods that are expected to become more frequent in a warming climate, could spur insurance adoption. Using improved estimates of residential insurance take‐up in locations where such insurance is voluntary, and exploiting variation in the frequency and severity of flood events over time, we quantify how flood events impact local insurance demand. We find that a flood disaster declaration in a given year increases the take‐up rate of insurance by 7% in the following year, but that the effect diminishes in subsequent years and is gone after 5 years. This effect is more short‐lived in counties in inland states that do not border the Gulf and Atlantic coasts. We also find that the effect of a flood on take‐up is substantially larger if there was also a flood in the previous year, and that recent disasters are more salient for homeowners whose primary residences are exposed to a disaster declaration compared to non‐primary residences. Overall, these findings suggest that relying on households to self‐adapt to increasing flood risks in a changing climate is insufficient for closing the insurance protection gap.https://doi.org/10.1029/2023EF004110flood riskdisasterinsuranceadaptationclimate |
| spellingShingle | June Choi Noah S. Diffenbaugh Marshall Burke The Effect of Flood Exposure on Insurance Adoption Among US Households Earth's Future flood risk disaster insurance adaptation climate |
| title | The Effect of Flood Exposure on Insurance Adoption Among US Households |
| title_full | The Effect of Flood Exposure on Insurance Adoption Among US Households |
| title_fullStr | The Effect of Flood Exposure on Insurance Adoption Among US Households |
| title_full_unstemmed | The Effect of Flood Exposure on Insurance Adoption Among US Households |
| title_short | The Effect of Flood Exposure on Insurance Adoption Among US Households |
| title_sort | effect of flood exposure on insurance adoption among us households |
| topic | flood risk disaster insurance adaptation climate |
| url | https://doi.org/10.1029/2023EF004110 |
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