Finance Professor Sees Opportunity to Help Community After Ida Floods

NJIT Assistant Professor Steve Taylor, of Millburn, is dissatisfied with how insurance companies deal with natural disasters and is preparing to offer an alternative.

Taylor witnessed extreme flooding from Hurricane Ida early this month in Millburn, where he resides. He also saw that many of his neighbors and local small business owners had their claims denied, despite being loyal customers of their insurance companies, as they lacked flood policies. Some had been advised by insurance agents that it wasn't a flood zone, based on data and maps that became obsolete decades ago.

"It basically wiped out half of our downtown. Several small businesses had three or four feet of water on their first floor with cellars and basements holding inventory completely filled to the brim. An alley through the center of our town turned into a class-3 rapids," explained Taylor, who rescued his eight-month-pregnant wife and left her car on the side of the road due to flooding.

“I am a math, stats and computer guy, a natural introvert, and generally like to keep to myself,” Taylor said. "But when you see your wife put in needless danger and also learn that one of your co-authors and close friends from a neighboring N.J. university had a near-death experience when water infiltrated his car … I took it as a clear sign that I need to be more proactive in cleaning up the mess left behind." 

After dealing with the immediate crisis, Taylor started helping others in the days following the storm, starting with his neighbors and local small business community. As he tells the story, inspired by the storm, "I have been getting more involved in my community with practical finance efforts recently. … I have been learning from Joanna Parker-Lentz and Micole Richter, two successful local entrepreneurs, how to organize teams of volunteers and fundraise through GoFundMe. Steve Grillo from Explore Millburn-Short Hills has been teaching me how to work with owners to apply for federal, state and local disaster relief programs in a manner that does not disrupt their day-to-day operations.”

“However, dollars alone cannot solve all problems. I had the opportunity to participate in a bucket line removing all manner of debris from the basement of one owner who got the worst of the storm. The hope was to prevent mold issues from compounding the problem in the event the house can be saved. While teaming up with the owner with a pair of channel locks in his hand and an adjustable wrench in mine, we removed the gas line from his dryer and I discovered he was an actuary working on problems related to my fintech research area," Taylor continued.   "Sometimes funding can help solve problems, but other times you need to get a bit dirty, even if that involves manually ripping a basement stair handrail out of soaking wet drywall to make clearance for the removal of a destroyed washer/dryer put in decades ago. My wife tells me I am a bit messy and disorganized, but that day, we cleaned house."

As a serial entrepreneur in financial technology and Martin Tuchman School of Management finance instructor since 2017, Taylor sees business opportunities where others may only see problems. To address the insurance problems, Taylor envisions a new business, perhaps organized as a non-profit, functioning as a community-based insurer. His recent research with Professor Runhuan Feng from University of Illinois Urbana-Champaign emphasizes peer-to-peer alternatives to traditional flood insurance coverage, also known as decentralized insurance.

"There is a clear market demand for peer-to-peer local insurance solutions. We hold the view that if you make a  higher quality product at significantly lower cost and with more integrity than your competitor, the market will find a way. We have since been revising our thoughts on this matter, have engaged academic quantitative colleagues who are familiar with state-of-the-art flood modeling techniques and are in preliminary talks with prospective business partners and seed investors to see if such ideas may gain practical traction," Taylor said. "We are looking for driven students with strong front-end web development skills, such as Angular, D3 and Google Cloud to get involved."

For many residents and business people in Millburn, "It has been an absolute mess" dealing with FEMA and their personal insurance companies, he said. "Intake forms have barely been updated in the 15 years since Hurricane Katrina. Key insurance policy recommendations are being made of antiquated flood maps. Now is the time to start building the future. We are always interested in speaking with NJIT students and faculty who want to get involved in this area of research as well as external business partners and advisors."

"[We are] looking forward to coordinating with local, county, state and perhaps federal representatives to ensure that we find and enact an authentic solution to this problem, both at the insurance and future flash flood prevention levels," he added. "This will give small businesses the confidence they need to operate in an environment where such an event is not likely to recur in the future. For now, we want them to know their community is with them, and we will all come out of this stronger."