While homeowners-insurance policy exclusions can burden consumers with significant out-of-pocket expenses, expanding policies to fill coverage gaps creates a new set of challenges, such as affordability issues, lower consumer demand as rates rise and regulatory approval for risk-based rates, the Government Accountability Office says.
As coastal populations grow, and with the possibility of more frequent and severe weather, the GAO was asked to study the possibility of private insurers providing more comprehensive insurance that includes coverage for risks currently excluded.
The GAO, in a January report, says, “A main challenge is that expanded coverage would have higher costs, potentially limiting consumer demand. Even if insurers charged higher rates that were based on risk, the severity and unpredictability of catastrophic losses could still jeopardize insurers' solvency.
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