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Working Paper
Health Insurance as an Income Stabilizer
We evaluate the effect of health insurance on the incidence of negative income shocks using the tax data and survey responses of nearly 14,000 low income households. Us-ing a regression discontinuity (RD) design and variation in the cost of nongroup pri-vate health insurance under the Affordable Care Act, we find that eligibility for sub-sidized Marketplace insurance is associated with a 16% and 9% decline in the rates of unexpected job loss and income loss, respectively. Effects are concentrated among households with past health costs and exist only for “unexpected” forms of earnings ...
Working Paper
The Bronx Is Burning: Urban Disinvestment Effects of the Fair Access to Insurance Requirements
We study the unintended effects of Fair Access to Insurance Requirements (FAIR) plans developed by 26 states in the 1960s to address insurance redlining in urban neighborhoods. FAIR plans’ problematic features included prohibitions on considering environmental hazards in underwriting, mandatory insurer participation that diluted underwriting incentives, and payouts exceeding market values in declining areas. Using a triple-difference design comparing pre/post-FAIR periods, neighborhoods with/without likely FAIR access, and participating/nonparticipating states, we find that FAIR ...
Newsletter
Homeowners insurance and climate change
Over the past 25 years, the U.S. has experienced a sharp increase in climate-related disasters totaling billions of dollars in damages. For those whose homes are destroyed, the financial impact can be devastating. Fortunately, many have some of their losses covered by homeowners insurance. In 2017—a particularly costly year in terms of weather-related damages—insurers reported around $68 billion in losses from homeowners insurance claims. Still, with the number and intensity of climate-related disasters on the rise, it is important for us to understand the degree to which homes are ...
Working Paper
Climate Risk, Insurance Premiums and the Effects on Mortgage and Credit Outcomes
As climate change exacerbates natural disasters, homeowners’ insurance premiums are rising dramatically. We examine the impact of premium increases on borrowers’ mortgage and credit outcomes using new data on home insurance policies for 6.7 million borrowers. We find that higher premiums increase the probability of mortgage delinquency, as well as prepayment (driven mainly by relocation). The results hold using a novel instrumental variable. The delinquency effect is greater for borrowers with higher debt-to-income ratios. Both delinquency and prepayment effects are present in both GSE ...
Working Paper
Flood Risk Mapping and the Distributional Impacts of Climate Information
This paper examines the provision of official flood risk information in the United States and its distributional impacts on residential flood insurance take-up. Assembling new data on all flood maps produced after Hurricane Katrina, I first document that updated maps decreased the number of properties zoned in high-risk floodplains and incorrectly omitted five million properties that should have been rezoned inside these areas. Removals and omissions disproportionately occurred in neighborhoods with more Black and Hispanic residents. Leveraging the staggered timing of map updates, I estimate ...
Working Paper
Flood Underinsurance
Using data on expected flood damage and National Flood Insurance Program policies, we estimate annual flood risk protection gaps and underinsurance among single-family residences in the contiguous United States. Annually, 70 percent ($17.1 billion) of total flood losses would be uninsured. Underinsurance, defined as protection gaps among properties with positive flood risk and incentives to purchase full flood insurance coverage, totals $15.7 billion annually. Eighty percent of at-risk households are underinsured, and average underinsurance is $7,208 per year. Underinsurance persists both ...
Working Paper
Missouri’s Medicaid Contraction and Consumer Financial Outcomes
In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. These cuts resulted in the elimination of the Medical Assistance for Workers with Disabilities program, more stringent eligibility requirements, and less generous Medicaid coverage for those who retained their eligibility. Overall, these cuts removed about 100,000 Missourians from the program and reduced the value of the insurance for the remaining enrollees. Using data from the Medical Expenditure Panel Survey, we show how these cuts increased out-of-pocket medical spending for ...
Working Paper
Pricing of Climate Risk Insurance: Regulation and Cross-Subsidies
Homeowners’ insurance, a $15 trillion market by coverage, provides households financial protection from climate losses. Insurance premiums (rates) are subject to significant regulations at a state level in the United States. Using novel data on filings made by insurers to regulators, we propose a metric to quantify the extent of regulation in individual states. We provide evidence of decoupling of insurance rates from their underlying risks and identify regulation as a driving force behind this pattern. Rates are least reflective of risk in states we classify as "high friction", ...