Howard C. Kunreuther is the James G. Dinan Professor; Professor of Decision Sciences and Business and Public Policy at the Wharton School, and co-director of the Wharton Risk Management and Decision Processes Center. He has a long-standing interest in ways that society can better manage low-probability, high-consequence events related to technological and natural hazards. Professor Kunreuther is a Fellow of the American Association for the Advancement of Science and a Distinguished Fellow of the Society for Risk Analysis, receiving the Society’s Distinguished Achievement Award in 2001. He recently served on the National Academy of Science / National Research Council’s panel on Increasing National Resilience to Hazards and Disasters. He also served on the New York City Panel on Climate Change (NPCC) as part of the Special Initiative for Rebuilding and Resiliency (SIRR) and the report released by the New York City Mayor’s Office in June 2013. He is a Coordinating Lead Author for the Intergovernmental Panel on Climate Change (IPCC)’s 5th Assessment Report, Working Group 3, Chapter 2, “Integrated Risk and Uncertainty Assessment of Climate Change Response Policies.” Dr. Kunreuther served as a member of the World Economic Forum’s Global Agenda Council on Insurance and Asset Management for 2011-2012, and in 2009-2010 was co-chair of the Forum’s Global Agenda Council on Leadership and Innovation for Reducing Risks from Natural Disasters. His recent books include At War with the Weather (with Erwann Michel-Kerjan) (MIT Press, 2009, paperback, 2011), winner of the Kulp-Wright Book Award from the American Risk and Insurance Association in 2011; Learning from Catastrophes: Strategies for Reaction and Response (with Michael Useem) (Financial Times Press, 2010); and Insurance and Behavioral Economics: Improving Decisions in the Most Misunderstood Industry” (with Mark Pauly and Stacey McMorrow) (Cambridge University Press, 2013).
- decision processes
- low-probability events and decision making
- managerial economics
- operations management
- risk assessment
Despite the vulnerability of America’s aging infrastructure to costly disruptions from man-made and natural disasters, infrastructure insurance under-utilized. On average, only 30% of catastrophic losses in the past 10 years have been covered by insurance. Most infrastructure project managers have relied instead on taxpayer-funded federal aid when disaster strikes. But it doesn’t need to be this way. In this brief, Gina Tonn, Jeffrey Czajkowski, and Howard Kunreuther use technical reports and input from infrastructure managers to outline steps that policymakers can take to help maximize the use of infrastructure insurance for providing financial protection, encouraging investment in loss mitigation measures, and limiting the current reliance on taxpayer dollars.
Consumers tend to purchase too little insurance or purchase it too late. Consequently, taxpayers wind up bearing substantial burdens for paying reconstruction costs from extreme events. The 2005 and 2012 hurricane seasons alone cost taxpayers nearly $150 billion. There is much that can be done to better facilitate the role that insurance can play in addressing losses from extreme events, both natural and man-made.
The Terrorism Risk Insurance Act (TRIA) is set to expire at the end of 2014 and is currently under debate in Congress. Renewing TRIA may limit the amount of disaster relief the federal government would contribute after a terrorist attack, but the different options under which TRIA might be renewed carry implications for how losses from any attack would be spread between commercial policyholders, insurers, and taxpayers.
The United States has entered a new era of catastrophes, of which floods have been the most devastating. Through its 2012 reform (Biggert-Waters Act), the 45-year old federally-run National Flood Insurance Program has an opportunity to highlight the role that risk-based premiums can play in encouraging individuals to undertake loss reduction measures. But the implementation of this reform is now being challenged due to concerns that residents cannot afford risk-based premiums. The authors of this brief propose that this can be overcome by successfully combining risk-based pricing, required insurance, means-tested insurance vouchers, and mitigation loans, so that individuals reduce their flood risk and are financially protected against future disaster losses, thus reducing the need for taxpayer money for disaster relief in the future.
"B-School for Public Policy" Seminars
June 23, 2017Insuring High Risks Fairly
The National Flood Insurance Program (NFIP) encompasses issues of risk transparency and fairness. There is general agreement that floodplain residents need to know their risk-based insurance premium–and with that information, how to make their homes safer and thus make flood insurance more affordable. This talk, by Professor Howard Kunreuther, focused on the importance of accurate mapping of flood risk, how to encourage investment in cost effective mitigation measures, and ways to deal with fairness and affordability in designing a flood insurance program for the future.
Other Policy Related Activities
2015 Recipient of the 2015 Shin Research Excellence Award awarded by the Geneva Association and the International Insurance Society (IIS) in recognition of outstanding work on the role of public-private partnerships in mitigating and managing risks.
2015 U.S. Congress roundtable, Subcommittee on Economic Development, Public Buildings, and Emergency Management on “The State of Pennsylvania and FEMA Region III are Leaders in Mitigating Disaster Costs and Losses,” May 28
2014 – present Technical Mapping Advisory Council (TMAC), Federal Emergency Management Agency
2014 – present Assessing Incentives for Uptake and Distributional Consequences of the National Flood Insurance Program (Sloan Foundation)
2014 – present National Academies / National Research Council, Roundtable on Risk, Resilience, and Extreme Events. Policy and Global Affairs Division,
2014 – present Editorial Board, Journal of Extreme Events
2014 – present Advisory Editor, Oxford Research Encyclopedia of Natural Hazard Science
2013 – present New York City Panel on Climate Change
2012 – present Editorial Board, Journal of Financial Perspectives
2012 – present World Bank Advisory Committee, Strengthening Disaster Risk Assessments to Build Resilience to Natural Disasters.
2012 – present 2013 Synthesis of the National Climate Assessment, United States Global Change Research Program, lead author for the chapter on “Decision Support.”
Recent News Stories
Professor Howard Kunreuther has received the 2015 Shin Research Excellence Award from the Geneva Association and the International Insurance Society (IIS) in recognition of his outstanding work on the role of public-private partnerships in mitigating and managing risks. The above video is a presentation by Professor Kunreuther on “Insuring Against Extreme Events: The Need for Public-Private Partnerships.”