The representative heuristic and catastrophe-related risk behaviors

Dumm, Randy E.; Eckles, David L.; Nyce, Charles; Volkman-Wise, Jacqueline

doi:10.1007/s11166-020-09324-7

Cited by 27 publications

(19 citation statements)

References 27 publications

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“…The study by Gallagher ( 2014 ) found that uptake from not affected areas also increased and is consistent with the Bayesian learning model that allows for forgetting or incomplete information about past events. Whilst Dumm et al ( 2020 ) found that the effect attenuates as the losses fade from memory, the effect of losses on demand is much higher for more recent losses. According to Dumm et al ( 2020 ), the representative heuristic model shows that individual policy holders overweight the probability of another catastrophic event occurring by nearly 50%, after such event has occurred.…”

Section: Resultsmentioning

confidence: 99%

“…Whilst Dumm et al ( 2020 ) found that the effect attenuates as the losses fade from memory, the effect of losses on demand is much higher for more recent losses. According to Dumm et al ( 2020 ), the representative heuristic model shows that individual policy holders overweight the probability of another catastrophic event occurring by nearly 50%, after such event has occurred.…”

Section: Resultsmentioning

confidence: 99%

“…It is important to note that Segal et al ( 2018 ) found that the prosocial behaviour existed amongst the individuals who attributed the event to a super natural agency. According to Böhmelt ( 2020 ), the salience on natural hazard insurance increases just after an event and it attenuates after a short period after the event (Dumm et al 2020 ) affirming the accession by stating that insurance take-ups spike just after the flood and then steadily decline to baseline. The study by Gallagher ( 2014 ) found that uptake from not affected areas also increased and is consistent with the Bayesian learning model that allows for forgetting or incomplete information about past events.…”

Section: Resultsmentioning

confidence: 99%

See 2 more Smart Citations

Natural hazard insurance demand: A systematic review

Mushonga

Mishi

2022

Jàmbá Journal of Disaster Risk Studies

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The mitigation of natural hazard costs such as loss of property, life, crops and medical costs can be achieved through the adoption of insurance. It is, however, not clear whether there is corresponding demand for insurance given the increasing frequency and veracity of natural hazards, especially in South Africa. This study follows the guideline of Preferred Reporting items for Systematic Review and Meta-analysis Protocols (PRISMA-P) to identify the relevant works on the subject. A total of 645 articles emerged on initial search and after screening, 39 remained which have been reviewed in this study. Reviewing the studies and conflating with the study objectives, the following themes emerged for discussion on demand for natural hazard insurance, is there demand for natural hazard insurance?;psychology of decision-making; risk perception; risk preference and willingness to pay. The study found that studies of demand for insurance have identified that there is low demand for tailor-made insurance products for natural hazards. Further analysis of the demand revealed that normative and descriptive decision-making of buying natural hazard insurance is part of the psychological factors that determine demand. Whilst risk preference and perception have sub-attributes that affect their impact on demand such as experience, age and salience to natural hazards in communities. Whilst willingness to pay is also a broad concept which is analysed using both monetary and non-monetary factors in literature, the results also identified that there is a huge gap in literature in terms of studies that cover risk preference and perception in Africa and in the Southern African Development Community (SADC) region.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

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Natural hazard insurance demand: A systematic review

Mushonga

Mishi

2022

Jàmbá Journal of Disaster Risk Studies

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“…The representative heuristic has been shown to increase aggregate demand for insurance in the presence of recent losses and lower demand when a loss has not occurred recently. At the same time, similarly, availability bias captures the ease with which the association of an event can be brought to mind (Dumm et al, 2020). Now, let us consider the classic example of a person who rationally believed in the cold state (t 1N ) to need no insurance, for instance, against credit card theft at an effective price considered too high since he did not experience such a burden before.…”

Section: Discussionmentioning

confidence: 99%

Uncertainty and Demand for Insurance: A Theoretical Model of How Self-Control Manages the Optimal Decision-Making

Adamo

Malizia

2021

Front. Psychol.

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With the present work, we aim to mark a beginning line on the study of decision-making of potential consumers in the insurance sector, with the long-term purpose of defining the optimal cognitive processes to be undertaken when deciding whether to purchase insurance or not. Decision-making in conditions of uncertainty is influenced by the dual-self model doers/planner integrated with the hot–cold states and prospect utility function. Thus, we present a theoretical model of choice-making to evaluate the level of optimal self-control necessary to be exerted if the individual is either in the hot or in the cold state depending on the arousal. This theoretical choice-making model lays the ground for the decision journey by following the long-term utility and avoiding gross mistakes that could lead the consumer not to insure, when the odds suggest doing it, or vice versa, in situations when it would not be necessary.

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“…Behavior depends on events in the decision maker's most recent memories, which changes over time. Recent empirical research has found some evidence that flood insurance purchasing behavior among Florida homeowners is consistent with this effect (Dumm et al 2020).…”

Section: Broad Bracketing In the Face Of Repetition And Feedbackmentioning

confidence: 97%

Broad bracketing for low probability events

2020

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Individuals tend to underprepare for rare, catastrophic events because of biases in risk perception. A simple form of broad bracketing—presenting the cumulative probability of loss over a longer time horizon—has the potential to alleviate these barriers to accurate risk perception and increase protective actions such as purchasing flood insurance. However, it is an open question whether broad bracketing effects last over time: There is evidence that descriptive probability information is ignored when decisions are based on “experience” (repeatedly and in the face of feedback), which characterizes many protective decisions. Across six incentive-compatible experiments with high stakes, we find that the broad bracketing effect does not disappear or change size when decisions are made from experience. We also advance our understanding of the mechanisms underlying broad bracketing, finding that, while cumulative probability size is a strong driver of the effect, this is dampened for larger brackets leading people to be less sensitive to probability size.

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The representative heuristic and catastrophe-related risk behaviors

Cited by 27 publications

References 27 publications

Natural hazard insurance demand: A systematic review

Natural hazard insurance demand: A systematic review

Uncertainty and Demand for Insurance: A Theoretical Model of How Self-Control Manages the Optimal Decision-Making

Broad bracketing for low probability events

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