Joakim Weill (Federal Reserve Board of Governors), avec Joshua Blonz, Mallick Hossain, Benjamin J. Keys, et Philip Mulder
We study how location and household characteristics determine homeowners’ insurance pricing. Using 70 million insurance policies linked to mortgages and a property-level disaster risk model, we show that individual’s credit scores have large effects on premiums, comparable in magnitude to disaster risk. In many cases, premiums depend more on who lives in the home than on the disaster risk the home faces. Leveraging a temporary ban on credit-based pricing in Washington State, we find that restricting the use of credit information compresses the credit–premium gradient and reallocates costs across households. These results indicate that credit information not only affects housing costs through mortgage borrowing, but also through insurance pricing. We discuss mechanisms behind the credit-premium gradient and their implications for housing affordability and the incidence of disaster risk.