Market Failure in Information: The National Flood Insurance Program

Chivers, James; Flores, Nicholas E.

doi:10.2307/3146850

Cited by 124 publications

(71 citation statements)

References 5 publications

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“…If individuals consider that the probability or potential magnitude of loss is low, insurance may appear unattractive, even at subsidized rates (Petrolia et al 2013). The literature also shows that individuals often underestimate the risk (Camerer and Kunreuther 1989;Chivers and Flores 2002;Kunreuther 2006). Our results may explain why there is still inadequate participation in agricultural insurance markets although the government has highly subsidized the insurance premium.…”

Section: 65mentioning

confidence: 48%

Farmers’ Risk Preferences and Agricultural Weather Index Insurance Uptake in Rural China

Jia

Wang

2016

Int J Disaster Risk Sci

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The purpose of this study is to investigate the effect of farmers' risk preferences on their decisions to purchase the agricultural weather index insurance based on the evidence from a household survey and field experiments conducted in Yongqiao District, Suzhou City of Anhui Province in China. Our empirical results show that farmers' risk aversion significantly increases the probability of their decision to buy weather index-based crop insurance. Other factors that significantly influence weather index insurance participation decisions include farmers' subjective beliefs on the probability of crop losses, farming experience, education level, farm size, and their household income. The empirical results of this study can provide helpful insights for policymakers and local insurers to further improve farmers' participation in weather indexbased crop insurance.

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Section: 65mentioning

confidence: 48%

Farmers’ Risk Preferences and Agricultural Weather Index Insurance Uptake in Rural China

Jia

Wang

2016

Int J Disaster Risk Sci

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“…Several studies indicate that markets in insurance are not working correctly in these areas (e.g., Chivers and Flores, 2002;Kunreuther and Pauly, 2004). As a specific and probably poorly known example, White (2001) suggests that options market for catastrophes have not worked as well as had been hoped.…”

mentioning

confidence: 99%

Why environmental and resource economists should care about non-expected utility models

Shaw

Woodward

2008

Resource and Energy Economics

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Experimental and theoretical analysis has shown that the conventional expected utility (EU) and subjective expected utility (SEU) models, which are linear in probabilities, have serious limitations in certain situations. We argue here that these limitations are often highly relevant to the work that environmental and natural resource economists do. We discuss some of the experimental evidence and alternatives to the SEU. We consider the theory used, the problems studied, and the methods employed by resource economists. Finally, we highlight some recent work that has begun to use some of the alternatives to the EU and SEU frameworks and discuss areas where much future work is needed. #

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“…As noted by Chivers (2002) "even if people do not appreciate the risk they face by locating in the flood plain for whatever reason, compulsory insurance, … will force them to face the social cost of locating in the flood plain". If compulsory flood insurance is present, then risk of flooding becomes explicitly known to people making a choice to buy a house or to invest.…”

Section: Insurance Against Flooding As a Measure To Increase Coastal mentioning

confidence: 99%

“…Subjective probabilities of an event are updated whenever a hazard event occurs and become lower if it does not occur for a long time. Empirical studies also reveal that the perception of risk increases after an event (Kaiser et al, 2004) and gradually reduces in the long-term, if an event does not happen periodically (Chivers and Flores, 2002). Tatano et al (2004) proposed an urban model, in which the probability of a disaster was integrated as a qualitative characteristic of land.…”

Section: Theory: Urban Economics and Economic Decisions Under Riskmentioning

confidence: 99%

“…Insurance against flooding has been implemented for flood-prone areas in several countries, such as France, Germany, the UK and the USA, but not in the Netherlands. Compulsory flood insurance is supposed to improve the economic efficiency of the use of the flood-prone areas (Chivers and Flores, 2002). One of flood insurance's primary purposes is to guarantee premiums proportional to risk for individuals in vulnerable areas (Krutilla, 1966).…”

Section: Insurance Against Flooding As a Measure To Increase Coastal mentioning

Market Failure in Information: The National Flood Insurance Program

Cited by 124 publications

References 5 publications

Farmers’ Risk Preferences and Agricultural Weather Index Insurance Uptake in Rural China

Farmers’ Risk Preferences and Agricultural Weather Index Insurance Uptake in Rural China

Why environmental and resource economists should care about non-expected utility models

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