Joakim (Jo) Weill

thanks, Alex! we did not expect credit scores to matter as much, and I'm still pondering over the implications for housing affordability

15.04.2025 19:26 — 👍 0    🔁 0    💬 0    📌 0

This paper leverages novel data on 15 million home insurance policies to understand how credit scores and natural disaster risks affect the price of home insurance. We find that individuals with subprime credit pay 30% more for home insurance than individuals with super-prime credit. These differences are not explained by property or contract-level characteristics, and likely reflect how insurers use credit score to price anticipated future claim filing behavior. Leveraging a house-level match with a proprietary disaster risk model, we find that the passthrough of expected annual disaster losses is close to one on average, higher than one for individuals with lower credit scores, and below one in high insurance-regulation states like California. We show that despite a passthrough rate for disaster risk close to one, disaster risks account for less than a quarter of premiums on average, and around a third in high-risk states like Florida and Louisiana. These findings reveal that at the policy-level, the disaster risk component of insurance prices is on average smaller than the discount given to people with high credit scores. Insurance prices often depend more on who lives in a home than on the disaster risk a home is exposed to

Important paper on the home insurance market. Authors use novel data on 15 million insurance policies + document many new descriptive facts.

For instance, "the average person’s homeowners insurance [costs] 17% of their monthly principal and interest payment."

papers.ssrn.com/sol3/papers....

14.04.2025 21:20 — 👍 18    🔁 3    💬 1    📌 0

whether the mandate (c) reduces adverse selection or causes market unraveling depends on the details of (a) and (b)

12.01.2025 16:13 — 👍 2    🔁 0    💬 0    📌 0

For b) we also need to specify what homes are covered by the public option (all homes? cf US flood insurance. only the riskiest homes? cf FAIR plans), BUT also the state involvement (full involvement like US flood insurance, or a backstop above given threshold like in France?)

12.01.2025 16:09 — 👍 1    🔁 0    💬 1    📌 0

What matters for (a) is rates regulation (what price are insurers allowed to charge?)

12.01.2025 16:09 — 👍 1    🔁 0    💬 1    📌 0