Pure Market Solution: Inclusivity
In the section regarding financial management of flood risk, the pure market solution is evaluated as not inclusive because "Since premiums are risk-based, premiums for high-risk residential property owners are likely unaffordable for many". But isn't this more a question of affordability, i.e. the property owner is uninsured because it's too expensive to purchase insurance, not because it's unavailable?
Since private insurance premiums are risk-based, I thought that coverage would be available (inclusive) assuming the insured is willing to pay a high-enough premium. If not, then what is the difference between affordability and inclusivity?
Comments
So I've spent some time reading the paper and I think there is some overlap between the inclusivity and affordability points - If premiums are too expensive then of course you are not inclusive. I wouldn't say they are mutually exclusive points.
Affordable: An optimal approach should provide affordable protection for high-risk properties to ensure maximum participation
Inclusivity: An optimal approach should provide an insurance solution to all primary-residence property owners irrespective of the level and type of flood risk they face
I think one point to note however, is that homeowner's insurance is not mandatory in Canada like Auto. As such, under a risk-based premium approach you could have people who would just not be able to obtain coverage at all because they literally live in a flood plain. This would violate the inclusivity point above. Hope this helps!