Alternative to purchasing flood insurance

    The National Flood Insurance Program (NFIP) is in deep debt, owing billions of dollars to the U.S. Treasury after monstrous Hurricane Katrina (2005), Super Storm Sandy (2012), and Louisiana Epic Flood (2016). This program was first passed by the Congress in 1968, with the initial intention to entice coastal property owners to join this program by providing subsidies. In doing so, the premiums paid by property owners are distorted and do not fully reflect the real flooding risks they have to deal with. The misleading price signal unintentionally encourages property developments in risky areas, such as the Special Flood Hazard Areas (SFHA). In anticipation of rising seas and stronger coastal storms, rebuilding efforts seem to be on the path to further drive NFIP off the cliff.

    Purchasing flood insurance may relieve financial burden for home owners after a big storm hits. With the deeply troubled NFIP, it is sensible for home owners to think of alternatives. By utilizing original survey data merged with contextual data on flood risks, my coauthors and I have investigated the determinants of coastal residents' support for two adaptation policies: incentives for relocation and funding for educational programs for emergency planning and evacuation (Shao, et al., 2017). The major finding of this study is that perceptions of flood-related risks plays an essential role mediating the contextual flood risks and adaptation policies. The contextual risks, indicated by distance from the coast, maximum wind speed and peak height of storm surge from the last hurricane landfall, and percentage of high-risk flood zone per county, do not directly exert influence on policy support. Instead, these contextual risks impact one's adaptation policy support through risk perceptions. This finding implies the significance of risk perceptions and highlights the need for effective and accurate risk communication.

Reference:
Shao, W., Xian, S., Lin, N., and Small, M. J. 2017 "A sequential model to link contextual risk, perception and public support for flood adaptation policy." Water Research. doi.org/10.1016/j.watres.2017.05.072