Covering the Costs of Nature’s Fury: Consolidated Lessons of MILK’s Client Math Studies of Property Microinsurance
• The costs of flood damage to small businesses and low-income households are devastating. We find that all financing resources, individually, fall far short of meeting households’ needs, forcing them to cobble together financing from many different sources and typically delay or forgo repairs.
• Households in our studies generally failed to fully recover from the floods, even with insurance and even when the total amount of money they raised from various financing sources far exceeded their reported costs.
• Insurance played a valuable though limited role, reducing reliance on burdensome financing strategies (such as asset sales), creating incentives to rely on “better” financing strategies that are difficult in the short term but ultimately more efficient (such as reducing spending), and crowding in low-cost, flexible loans from friends and family.
• Payment of benefits was severely delayed in each of the four studies, with significant implications for the products’ value.
• Across our studies, households tended to prioritize spending to regain their ability to earn income; this suggests that faster claims payment might have allowed insured households
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