Community Disaster Protection Act

Consumer Outreach and Research Funding: Section 2(b)(1) and Section 2(b)(2) allow grant recipients to use funds for consumer research, outreach, education, and enrollment. This is positive because it helps everyday people better understand their insurance options, coverage gaps, and financial risks related to natural disasters.

Clear Consumer Disclosures: Section 2(c)(1)(C) requires community-based insurance products to provide clear, plain-language disclosures about covered perils, exclusions, deductibles, and how the policy interacts with traditional insurance or disaster assistance. This benefits the public by ensuring consumers know exactly what they are buying and what to expect after a disaster hits.

Disaster Resilience Incentives: Section 2(c)(1)(E) requires programs to promote or incentivize community-wide and individual measures to reduce potential losses and increase disaster resilience. This can help people protect their homes and lower their long-term disaster risks.

Streamlined Claims and Payouts: Section 2(c)(1)(F) and Section 2(c)(3)(B) encourage streamlined claims processes and parametric programs that provide timely fixed or graduated payments when predetermined disaster triggers are met. This is a positive outcome for individuals who need fast financial help to recover after a catastrophe.

Potential Basis Risk in Parametric Programs: Section 2(c)(1)(G) and Section 2(i)(3) allow programs to operate using parametric triggers, which carries "basis risk"—defined as the potential difference between the actual loss a person suffers and the payout they receive from the program. This could negatively impact individuals if a disaster occurs and their payout does not fully cover their actual financial losses.

Premium Costs and Financial Sustainability: Section 2(c)(1)(D) requires premiums to be actuarially sound, and Section 2(b)(8) discusses the eventual need for long-term financial sustainability after the pilot program concludes. If non-Federal financial support or premium assistance runs out, individuals could face higher, unaffordable out-of-pocket premium costs to maintain their coverage.