Understanding Cumulative Risk Perception from Judgments and Choices: An Application to Flood Risks

Abstract

Catastrophic events, such as floods, earthquakes, hurricanes, and tsunamis, are rare, yet the cumulative risk of each event occurring at least once over an extended time period can be substantial. In this work, we assess the perception of cumulative flood risks, how those perceptions affect the choice of insurance, and whether perceptions and choices are influenced by cumulative risk information. We find that participants' cumulative risk judgments are well represented by a bimodal distribution, with a group that severely underestimates the risk and a group that moderately overestimates it. Individuals who underestimate cumulative risks make more risk‐seeking choices compared to those who overestimate cumulative risks. Providing explicit cumulative risk information for relevant time periods, as opposed to annual probabilities, is an inexpensive and effective way to improve both the perception of cumulative risk and the choices people make to protect against that risk.

Effects of Probabilistic Risk Situation Awareness Tool (RSAT) on Aeronautical Weather-Hazard Decision Making

“…The results also have implications for some of the challenges demonstrated in conveying cumulative risk in various domains like breast-cancer medication risk (Zikmund-Fisher et al, 2008), contraception methods related risk (De La Maza et al, 2019), stroke risk (Fuller et al, 2004), flood risk (De La Maza et al, 2019), etc. mentioned before.…”

“…Extremely small risk levels in the near term can accumulate to become extremely hazardous in the long run when continuous exposure to the same risk factors occurs for a long duration (e.g., smoking for years) or simultaneous exposure to multiple factors (e.g., smoking and drinking). Perceptions of cumulative risk are studied widely in various socially significant issues like smoking (Weinstein, 1998;Slovic, 2000), climate change (Crawford-Brown and Crawford-Brown, 2012), contraceptive failures (Doyle, 1997), floods (De La Maza et al, 2019), Sexually Transmitted Diseases (Knauper et al, 2005), stroke risk (Fuller et al, 2004), medical treatments (Dijkstra et al, 2000), and so on. Most of these risky catastrophic events have a very low probability of happening in a particular month or a year; however, those probabilities can aggregate to a very high cumulative risk over a decade or lifetime, causing significant losses (Slovic et al, 1978).…”

“…Even the simplest forms of the cumulative probability of encountering an event X at least once in T years, as calculated by Equation 1 below, is relatively complex and non-intuitive for humans (De La Maza et al, 2019).…”

A Description–Experience Framework of the Dynamic Response to Risk

“…Generalizing the common probability-weighting pattern from research on the descriptionexperience gap to this epistemic state, one may expect this physician to behave as if they underweight rare (and possibly delayed; De La Maza, Davis, Gonzalez, & Azevedo, 2019) risks. Their experience tells them that rare events are indeed rare.…”

Future flood risk exacerbated by the dynamic impacts of sea level rise

“…We aim to translate the results of the CDSLR-driven biogeophysical models using FEMA's HAZUS tool to assess increasing ood risk to residential structures and people to a metric that is easily communicated to stakeholders and policy makers. It has been found that the public perception of risk, as communicated in probabilistic-based information, may not always be accurate and can affect their choice in choosing whether to buy ood insurance, for example 34 . Additional research suggests people are more likely to be motivated to hold insurance if they anticipate substantial damages to occur to their homes or businesses, or if they have previous experience with oods 35 .…”