Association for Public Policy Analysis & Management

This paper presents an analysis of flood insurance premiums in Massachusetts in relation to home valuations by municipality. An average home value under insurance and average flood insurance premium is computed for each municipality in Massachusetts. These averages are then compared among municipalities within the Commonwealth. Results indicate an inverse relationship between the average value of a flood insured home and the average flood insurance premium paid: Communities with lower average home values pay disproportionately more for flood insurance than communities with higher average home values. The correlation between these two variables improves when communities with lower total property value under insurance are excluded. The results suggest there is an regressive trend in flood insurance policy as pertains to Massachusetts communities. This evidence would suggest flood insurance rate setting needs to be examined if future policy goals are to move towards having insurance premiums act as a proxy for actual flood risks. The goal of the paper and presentation is to provide an evidence-based anlaysis of current policy outcomes and to show how those outcomes can frustrate identified policy goals.