Regulating Homeowners’ Disaster Insurance Through Federal Intervention: Lessons from the Affordable Care Act

by Shannon O'Hara

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Abstract

One of the most impactful effects of climate change in recent years has been the increasing frequency and severity of natural disasters, even in geographic areas not previously known as disaster-prone. These disasters have caused untold property damage. Typically, the cost of rebuilding a home is assumed at least in part by private insurance companies, but many homeowners are significantly underinsured for disaster-related losses. Additionally, in areas where natural disasters are becoming increasingly frequent, private insurers have determined that it is no longer profitable to continually issue massive payouts without charging astronomical premiums, leaving many homeowners without access to financial relief. This Note argues that these circumstances call for a federal intervention. Specifically, it analogizes owning a disaster-prone home to having a preexisting health condition as defined by the Affordable Care Act. Using lessons from this analogy, this Note proposes a federal mandate requiring all homeowners to purchase natural disaster insurance and argues such a policy is achievable through Congress's taxing power. Further, this Note argues that features of the proposed mandate, such as precaution crediting and a subsidized insurance program, render it superior to previously attempted regulation of natural disaster insurance.

Regulating Homeowners’ Disaster Insurance Through Federal Intervention: Lessons from the Affordable Care Act

by Shannon O'Hara

Click here for a PDF file of this article

Abstract

One of the most impactful effects of climate change in recent years has been the increasing frequency and severity of natural disasters, even in geographic areas not previously known as disaster-prone. These disasters have caused untold property damage. Typically, the cost of rebuilding a home is assumed at least in part by private insurance companies, but many homeowners are significantly underinsured for disaster-related losses. Additionally, in areas where natural disasters are becoming increasingly frequent, private insurers have determined that it is no longer profitable to continually issue massive payouts without charging astronomical premiums, leaving many homeowners without access to financial relief. This Note argues that these circumstances call for a federal intervention. Specifically, it analogizes owning a disaster-prone home to having a preexisting health condition as defined by the Affordable Care Act. Using lessons from this analogy, this Note proposes a federal mandate requiring all homeowners to purchase natural disaster insurance and argues such a policy is achievable through Congress's taxing power. Further, this Note argues that features of the proposed mandate, such as precaution crediting and a subsidized insurance program, render it superior to previously attempted regulation of natural disaster insurance.