Charity hazard—A real hazard to natural disaster insurance?

Raschky, Paul A.; Weck-Hannemann, Hannelore

doi:10.1016/j.envhaz.2007.09.002

Cited by 178 publications

(104 citation statements)

References 30 publications

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“…In terms of moral hazard effects, private flood mitigation could be negatively correlated with the expectation of financial damage coverage by (a) an insurance company or (b) some government relief payments -the latter is often referred to as 'charity hazard' and is a special case of moral hazard (Raschky and Weck-Hannemann 2007). The effect of being insured against flood damage on private mitigation is not often analysed.…”

Section: Literature Reviewmentioning

confidence: 99%

The determinants of private flood mitigation measures in Germany — Evidence from a nationwide survey

Osberghaus

2015

Ecological Economics

137

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. AbstractPublic flood protection cannot totally eliminate the risk of flooding. Hence, private mitigation measures which proactively protect homes from being flooded or reduce flood damage are an essential part of modern flood risk management. This study analyses private flood mitigation measures among German households. The dataset covers more than 6000 households from all parts of the country, including flood plains as well as areas which are typically not at a high risk of riverine flooding. The results suggest that the propensity to mitigate flood damage increases i.a. with past damage experience and damage expectations for the future. The latter effect can be interpreted as a 'climate adaptation signal' in the flood mitigation behaviour. All other factors remaining equal, a strong belief in a climate-change-induced increase of personal flood damage in the next decades induces an increase of the probability of flood mitigation by more than 10 percentage points. Moreover, strong evidence for moral hazard effects in the flood mitigation behaviour cannot be observed. Households expecting insurance coverage do not reduce their mitigation efforts. Likewise, the expectation of government relief payments hinders mitigation only for some groups of households.

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Section: Literature Reviewmentioning

confidence: 99%

The determinants of private flood mitigation measures in Germany — Evidence from a nationwide survey

Osberghaus

2015

Ecological Economics

137

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“…One main argument is that small probability events are overall ignored or potential damages are broadly underestimated by decision makers (Kunreuther 1984;Kunreuther et al 1978). Other explanations argue that the expectation of emergency relief is responsible for a low private demand (Raschky and Weck-Hannemann 2007).…”

Section: Implications For Uncertain Climate Response Measuresmentioning

confidence: 99%

Prospect theory, mitigation and adaptation to climate change

Osberghaus

2016

Journal of Risk Research

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. AbstractClimate change is one of the most pressing challenges in current environmental policy. Appropriate policies intended to stimulate efficient adaptation and mitigation should not exclusively rely on the assumption of the homo oeconomicus, but take advantage of well-researched alternative behavioural patterns. Prospect theory provides a number of climate-relevant insights, such as the notion that evaluations of outcomes are reference dependent, and the relevance of perceived certainty of outcomes. This paper systematically reviews what prospect theory can offer to analyse mitigation and adaptation. It is shown that accounting for reference dependence and certainty effects contributes to a better understanding of some well-known puzzles in the climate debate, including (but not limited to) the different uptake of mitigation and adaptation amongst individuals and nations, the role of technical vs. financial adaptation, and the apparent preference for hard protection measures in coastal adaptation. Finally, concrete possibilities for empirical research on these effects are proposed.

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“…This has contributed to develop the individuals' tendency not to insure or take any other mitigation measures, highlighting a problem known in literature as charity hazard or forgiveness money [24] [63].…”

Section: The Role Of the Italian State After Past Disasters And The Gmentioning

confidence: 99%

The Insurance Market of Natural Hazards for Residential Properties in Italy

Gizzi¹,

Potenza²,

Zotta³

2016

OJER

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Insurance is an effective complementary countermeasure for unexpected losses brought about by natural hazards. Coverage can be a useful tool considering in particular that public funds available to compensate for damages are limited and the consequences of catastrophes are becoming more severe over the time. Bearing this in mind, the authors performed a study aiming to clear up the main aspects and limits of the insurance market of natural hazards for residential properties in Italy. The opening sections of the paper give an overview of both the historical extreme events in Europe and Italy, and the reasons for the low insurance penetration rate in Italy. After that, the paper goes to the core of the research casting light upon the insurance market in Italy and examining the features and possible drawbacks of the available insurance covers. In this paper, the geophysical (seismic and volcanic) and hydrological (landslide and flood) hazards are analysed, and the residential stock is taken as a reference. After deepening in the local insurance market, the research focuses on the possible suggestions to stakeholders of how to increase the insurance penetration rate by taking advantage of the international experiences.

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Charity hazard—A real hazard to natural disaster insurance?

Cited by 178 publications

References 30 publications

The determinants of private flood mitigation measures in Germany — Evidence from a nationwide survey

The determinants of private flood mitigation measures in Germany — Evidence from a nationwide survey

Prospect theory, mitigation and adaptation to climate change

The Insurance Market of Natural Hazards for Residential Properties in Italy

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