Furthermore, reductions in insurance premiums are not awarded today, even if property owners invest in mitigation measures.

FEMA is now updating its flood maps to more accurately estimate the likelihood and potential consequences of future flooding to property at risk (NRC, 2007a, 2009). Premiums in many areas are likely to be higher than they are today and this increase could have a severe impact on low income and other households that need special treatment. For such reasons, people may not be enthusiastic about flood mapping even though more accurate flood maps can help individuals and communities assess flood risk. In cases where socially vulnerable members of a community may have difficulty paying insurance premiums as a result of new flood maps, insurance vouchers (similar in concept to food stamps) could be an option provided through federal programs. The NFIP was renewed in July 2012, and the legislation suggests that the Federal Emergency Agency and others examine ways to incorporate risk-based premiums coupled with means-tested insurance vouchers.c

One way to achieve resilience may also be to tie multiyear insurance policies in flood-prone areas to the property rather than to the individual to avoid cancellation of insurance. Enforcement of building codes through third-party audits by certified building inspectors could also help improve resilience. Home improvement loans for encouraging investment in loss reduction measures could be offered by banks with accompanying reductions in the cost of insurance to reflect the lower risk. In many cases the reduction in annual premiums may be greater than the annual loan payments. In these situations mitigating homes could be viewed as financially attractive. By modifying flood insurance in this way, we may avoid many of the problems faced, for example, by residents in the Northeast following Hurricane Irene (Michel-Kerjan and Kunreuther, 2011).




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