Factors affecting flood insurance penetration in residential properties in Johor Malaysia

Abstract

Abstract. High impact flood has virtually become an annual experience in Malaysia, yet flood insurance has remained a grossly neglected part of comprehensive integrated flood risk management. Using discriminant analysis, this study seeks to indentify the demand-side variables that best predict flood insurance penetration and risk aversion between two groups of residential homeowners in three districts of Johor State, Malaysia: those who purchased flood insurance and the group that did not. Our result revealed 34% penetration rate with Kota Tinggi district having the highest penetration (44%) and thus, the highest degree of flood risk aversion. The Wilks' Lambda F test for equality of group means, SCDFC, structure correlation and canonical correlation have clearly shown that there are strong significant attribute differences between the two groups of homeowners based on measures of objective flood risk exposure, subjective risk perception, and socio-economic cum demographic variables. However, measures of subjective risk perception were found more predictive of flood insurance penetration and flood risk aversion.