The National Flood Insurance Program&amp;rsquo;s Market Penetration Rate: Estimates and Policy Implications

Dixon, Lloyd; Clancy, Noreen; Seabury, Seth A.; Overton, Adrian

doi:10.7249/tr300

Cited by 130 publications

(163 citation statements)

References 11 publications

(10 reference statements)

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“…Homeowners whose buildings are on elevated ground are less likely to purchase insurance. Dixon et al (2006) also found out that the probability of people purchasing flood insurance is considerably higher in a coastal flooding area than at high elevation or in non-coastal areas.…”

Section: Objective Exposure and Susceptibilitymentioning

confidence: 83%

“…Botzen et al (2009) found that houses near a river are more likely to suffer flood damage than houses far away from a river once a dike breaches or is overtopped by high water levels. As Dixon et al (2006) posit, proximity to large bodies of water that are subject to coastal flooding serves as a constant reminder to homeowners in the community of the flood risk they face. From their research, Dixon et al (2006) found out that a location with a higher number of properties at risk of being flooded (known as a special flood hazard area) has a higher demand for flood insurance.…”

Section: Objective Exposure and Susceptibilitymentioning

confidence: 99%

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Factors affecting flood insurance purchase in residential properties in Johor, Malaysia

Aliagha

Jin

Choong

et al. 2014

Nat. Hazards Earth Syst. Sci.

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Abstract. High-impact floods have become a virtually 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 identify the demand-side variables that best predict flood insurance purchase and risk aversion between two groups of residential homeowners in three districts of Johor State, Malaysia: those who purchased flood insurance and those who did not. Our results revealed an overall 34 % purchase rate, with Kota Tinggi district having the highest (44 %) and thus the highest degree of flood risk aversion. The Wilks' lambda F test for equality of group means, standardised discriminant function coefficients, structure correlation, and canonical correlation has clearly shown that there are strong significant attribute differences between the two groups of homeowners, based on the measures of objective flood risk exposure, subjective risk perception, and socioeconomic cum demographic variables. However, the measures of subjective risk perception were found to be more predictive of flood insurance purchase and flood risk aversion.

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Section: Objective Exposure and Susceptibilitymentioning

confidence: 83%

Section: Objective Exposure and Susceptibilitymentioning

confidence: 99%

Factors affecting flood insurance purchase in residential properties in Johor, Malaysia

Aliagha

Jin

Choong

et al. 2014

Nat. Hazards Earth Syst. Sci.

View full text Add to dashboard Cite

show abstract

“…Of the 60,196 owner-occupied homes with severe wind damage from these hurricanes, 23,000 did not have insurance against wind loss (U.S. Government Accountability Office, 2007). Kriesel and Landry (2004) and Dixon et al (2006) found that only about half of the homes in high-risk areas had flood insurance. Along the entire New York coast affected by Hurricane Sandy in 2012, the City of New York found that 80% of residents in the inundated area did not have flood insurance, despite that coverage being subsidized for many (City of New York, 2013).…”

Section: Department Of Housing and Urban Development Revealed That 41mentioning

confidence: 99%

“…A RAND report estimated that roughly half of properties in 100-year floodplain purchased flood insurance, although there was substantial regional variation (Dixon et al, 2006 focus on the consequences of suffering a loss, the projection bias predicts a tendency for some decision makers to undervalue insurance.…”

mentioning

confidence: 99%

Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions

Kunreuther

Michel-Kerjan

2015

J Risk Uncertain

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Do individuals prefer a fixed-price multi-year insurance (MYI) policy to current annual contracts with fluctuating prices? If so, are they willing to pay more for these policies? In a web-based 2-period repeated game with significant real money at stake, individuals have an opportunity to purchase 1-period insurance contracts, 2-period contracts or no insurance against the risk of a hurricane causing damage to their property. When premiums for both insurance options are actuarially fair, more than five times as many people favor the 2-period contract over the 1-period contract. The demand for a 2-period contract remains high even with a loading cost of 5% and 10% while keeping the 1-period premium actuarially fair, indicating a preference for stable premiums over time. These findings support the need for multi-year contracts that will lead more individuals to be adequately protected against future extreme events, given the empirical evidence on lack of interest in insurance against catastrophic risks. KeywordsIndividual decision-making, choice under uncertainty, multi-year insurance, disaster THE WHARTON RISK MANAGEMENT AND DECISION PROCESSES CENTEREstablished in 1984, the Wharton Risk Management and Decision Processes Center develops and promotes effective corporate and public policies for low-probability events with potentially catastrophic consequences through the integration of risk assessment, and risk perception with risk management strategies. Natural disasters, technological hazards, and national and international security issues (e.g., terrorism risk insurance markets, protection of critical infrastructure, global security) are among the extreme events that are the focus of the Center's research.The Risk Center's neutrality allows it to undertake large-scale projects in conjunction with other researchers and organizations in the public and private sectors. Building on the disciplines of economics, decision sciences, finance, insurance, marketing and psychology, the Center supports and undertakes field and experimental studies of risk and uncertainty to better understand how individuals and organizations make choices under conditions of risk and uncertainty. Risk Center research also investigates the effectiveness of strategies such as risk communication, information sharing, incentive systems, insurance, regulation and public-private collaborations at a national and international scale. From these findings, the Wharton Risk Center's research team -over 50 faculty, fellows and doctoral students -is able to design new approaches to enable individuals and organizations to make better decisions regarding risk under various regulatory and market conditions. The Center is also concerned with training leading decision makers. It actively engages multiple viewpoints, including top-level representatives from industry, government, international organizations, interest groups and academics through its research and policy publications, and through sponsored seminars, roundtables and forums.More information...

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“…Although flood insurance is required to get a mortgage on a house in the flood plain from a federally insured institution, only half of the houses in a flood are insured (Dixon et al, 2006). When a flood occurs, many people rush to buy insurance, presumably because they now realize that the risk is real.…”

Section: Perceptions Of Floodingmentioning

confidence: 99%

Planning for natural disasters in a stochastic world

Lave

Apt

2006

J Risk Uncertainty

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We examine the risks and management of natural disasters. A benefit-cost framework focuses attention on (1) designing control structures, such as dams and levees, and mitigation policies, such as construction standards, to protect lives and property against small and medium, rather than large sized natural disasters; and (2) warning and evacuation to save lives for large natural disasters. Providing information rather than command solutions generally enhances social benefits, if people understand the risks and bear the expected costs. Requiring actuarially fair insurance simultaneously provides information and has individuals bear the expected costs.

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The National Flood Insurance Program’s Market Penetration Rate: Estimates and Policy Implications

Cited by 130 publications

References 11 publications

Factors affecting flood insurance purchase in residential properties in Johor, Malaysia

Factors affecting flood insurance purchase in residential properties in Johor, Malaysia

Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions

Planning for natural disasters in a stochastic world

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