Flood Paper - Figure 13
Can someone help to explain why the losses are higher for insured than uninsured for the Public schemes in the catastrophic losses graph? This is also the case in the average losses graph above it, but only for the Public insurer scheme only (which I also don't quite understand).
Under the Public insurer option, since purchase is mandatory for all, theoretically, shouldn't there be no yellow bar? Is this solely coming from the 5-10% assumption they are using for uninsureds?
Comments
1) I believe this is cause there is now a large pool of low-risk individuals that are mandated to purchase insurance. Many small flood losses which wouldn't have been covered under the other options would now have to be covered
2) Home insurance is not mandatory so you could have people who just don't have home insurance and consequently, no flood insurance
Thanks for your response! I still don't understand 1). I thought the graph was representing the losses assumed by household (i.e. the losses not covered by insurance). Is it higher for insureds than non-insureds solely due to the amount of deductibles paid for the small flood losses? I'm so confused.
I don't think this would be solely due to the deductible as each of the other programs also have a deductible. I think it could be because the participation rate assumption under the public insurer option is higher than the others which leads to more attritional losses in the deductible layer. It's difficult to tell without looking at the actual model output