The National Flood Insurance Program’s Market Penetration Rate

Estimates and Policy Implications

by Lloyd Dixon, Noreen Clancy, Seth A. Seabury, Adrian Overton

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Flooding is a major source of loss to individuals and businesses in the United States. Private insurers have historically been unable to provide flood insurance at affordable rates, and until the establishment of the National Flood Insurance Program in 1968, the primary recourse for flood victims was government disaster assistance. Congress adopted this program in response to the ongoing unavailability of private insurance and continued increases in federal disaster assistance. The Federal Emergency Management Agency is currently conducting a major evaluation of the program’s goals and performance. This report contributes to that evaluation by developing more reliable estimates of the proportion of single-family homes (excluding condominiums) that have flood insurance (the market penetration rate); by identifying factors that determine the market penetration rate; and by examining some of the opportunities for, and the potential benefits of, increasing the market penetration rate.

Table of Contents

  • Chapter One

    Executive Summary

  • Chapter Two


  • Chapter Three

    Methods Used to Estimate the Market Penetration Rate for Flood Insurance

  • Chapter Four

    The Market Penetration Rate for Flood Insurance

  • Chapter Five

    Factors That Determine the Market Penetration Rate for Flood Insurance in Special Flood Hazard Areas

  • Chapter Six

    The Effect of Increasing Market Penetration Rates on Disaster Assistance and on Community Compliance with Floodplain Management Requirements

  • Chapter Seven

    The Geographic Distribution of Flood Insurance Policies and the Variability of Losses

  • Chapter Eight

    Implications for Market Penetration Goals and Next Steps

  • Chapter Nine


  • Chapter Ten


  • Chapter Eleven


The research described in this report was funded at least in part with Federal funds from the Federal Emergency Management Agency and was performed by RAND Infrastructure, Safety, and Environment (ISE) and the RAND Institute for Civil Justice.

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