ACCI Conference 2024

Natural disasters pose a risk to Americans' financial health. For instance, the costs of repairing or replacing property or belongings damaged or destroyed in a natural disaster can be difficult to manage. Although homeowner’s or renter’s insurance can offer some protection, not all Americans carry residential insurance. The existing literature has identified consumer preferences, awareness of risks, cost-related barriers, and accessibility of insurance products as potential factors influencing the uptake of residential insurance products, but there has been little investigation into how the risk of natural disaster-related losses influences residential insurance coverage. Leveraging data from the nationally-representative 2021 Financial Health Pulse survey data linked to state-level FEMA records of natural disaster-related losses, this study finds that Americans living in states with higher than average natural disaster losses less frequently carried renters or homeowners insurance. This reflects the disproportionate share of renters in high-loss states and the lower rates of insurance ownership among homeowners. We find evidence that the cost of insurance is a barrier for residents in high-loss states. We conclude with recommendations for policymakers and industry audiences and hypotheses for future research to test.

Author(s): Kennan Cepa, Wanjira Chege, Angela Fontes