Behavioral motivations for self-insurance under different disaster risk insurance schemes

Abstract

This paper presents a lab-in-the-field experiment with 2111 Dutch homeowners in floodplain areas to examine the impacts of financial incentives and behavioral motivations for self-insurance under different flood insurance schemes. We experimentally varied the insurance type (mandatory public versus voluntary private) and the availability of a premium discount incentive for investing in flood damage mitigation measures. This setup allowed us to examine the existence of moral hazard, advantageous selection and the behavioral motivations of individual agents who face these different insurance types, without the selection bias that makes a causal inference from survey studies problematic. The main results show that a premium discount can increase investments in self-insurance under both private and public insurance. Moreover, we find no support for moral hazard in our natural disaster insurance market, but we do find a substantial share of cautious people who invest both in private insurance as well as in self-insurance, indicating advantageous selection. The results have implications for the design of insurance schemes to cope with increasing natural disaster risks.

Predicting support for flood mitigation based on flood insurance purchase behavior

“…Another study which was done among Florida households finds a positive correlation between insurance coverage and private mitigation measures [22]. Similarly, a recent study that uses an experiment among Dutch homeowners finds that individuals who buy insurance are more likely to selfprotect against flooding [23].…”

All by myself? Testing descriptive social norm-nudges to increase flood preparedness among homeowners

“…For instance, in countries where the government can provide compensation for flood damage, such as the Netherlands, individual investments in reducing flood damage save tax money for compensated victims after flood events. In a previous survey with Dutch homeowners, we elicited social norms with regard to individual flood damage-reducing measures (Mol et al, 2020b). We found that 25% of Dutch homeowners think that their peers would approve if they invested in damage-reducing measures, 50% are indifferent, and the remaining 25% think that their peers would disapprove.…”

Stakeholder Power-Interest Analysis of disaster insurance for public infrastructure in Semarang City

“…Persepsi bahwa investasi pada mitigasi merupakan tindakan yang efektif, menyebabkan adanya minat yang tinggi terhadap asuransi banjir di Dutch (Mol et al, 2018). Sebaliknya, dengan adanya persepsi rendahnya kemungkinan terjadinya banjir menyebabkan kurangnya keinginan dalam pembelian asuransi di Belanda (Botzen & Van den Bergh, 2012).…”