Moving the Needle on Closing the Flood Insurance Gap

Flood insurance is a vital element of household and community resilience. It provides funding to pay the costs of repair and rebuilding without the need to draw down savings, divert consumption, take on debt, or rely on often insufficient and delayed assistance from the federal government. Yet, many households at risk of flooding remain uninsured. For example, less than 25% of the buildings inundated by Hurricanes Harvey, Sandy, and Irma had flood coverage.In October 2018, the Wharton Risk Center’s Policy Incubator hosted a workshop designed to evaluate policy options for expanding the number of people with flood insurance in the United States, particularly those of low and moderate income. The workshop brought together roughly 50 experts across sectors and disciplines, including representatives from FEMA, the (re)insurance industry, lending institutions, state departments of insurance, non-profit organizations, and research institutions. Participants were divided into work groups, each focusing on different topics, and discussed policy options to help close the flood insurance gap.The workshop generated active and wide-ranging discussion. Participants agreed that the impact of many policies considered to date may be marginal, perhaps only slightly increasing the number with flood coverage. However, participants also identified a number of ideas that would involve larger, structural changes that they believed could help substantially increase the number of households with flood insurance. In this brief, we present seven approaches that workshop participants felt had the potential to generate more substantial increases in take-up rates across the country.FEMA has developed a moonshot goal of doubling the number structures with flood insurance in the United States by 2022. These policies have the possibility to contribute meaningfully to that goal. All, however, would require further refinement and development. We discuss the basic policy design of each proposal, as well as the challenges that would need to be addressed before implementation.