FLOOD INSURANCE DECISION-MAKING IN SACRAMENTO COUNTY, CA

Abstract

There is widespread research on how individual levels of risk perception and protective behaviors are impacted by flood control policy and structural mitigation measures. Despite this wealth of knowledge, there is a limited understanding of flood control policy impacts insurance uptake decisions, particularly when mandatory purchase requirements are in effect. Using the National Flood Insurance Program [NFIP] in Sacramento County, CA as a case study, this research addresses this gap. The present study uses aggregated data on policies in force, flood risk maps, and demographic data to compare how insurance uptake decisions differ between officially designated Special Flood Hazard Areas [SFHAs] with mandatory purchase requirements and non-SFHA with voluntary insurance participation. In the context of this study, the number of insurance policies in force will be measured by take-up rates and policy retention. Additionally, insurance policy quality will be measured by coverage levels and deductible amounts at the building and contents levels. Using Ordinary Least Squares [OLS] regression, the present study finds that mandatory purchase requirements in SFHAs increase take-up rates as hoped. However, these SFHA policies have lower coverage levels, and higher deductibles, and are in effect for less time. The findings of this study indicate that future research needs to focus on policy enforcement and the role of risk perception in insurance decisions.