Assessing the Drivers of Intrinsically Complex Hurricane Insurance Purchases: Lessons Learned from Survey Data in Florida

In the United States (U.S.), there is no one base policy for property insurance that can cover all disaster perils such as floods and windstorms. Hurricane-based insurance is intrinsically complex because the disaster peril may be excluded from a regular insurance policy and thus homeowners need to purchase a separate policy for that risk. Besides, the coverage for disaster perils often comes with separate deductibles and coverage limits. As a result, homeowners need to acquire a significant amount of information and knowledge to understand the insurance policies and make informed decisions about their coverage choices. This study utilizes decision trees to provide a comprehensive overview of flood and wind insurance purchase outcomes in the state of Florida. We also examine the behavioral, personal, and socio-demographic factors that influence the decision to obtain natural disaster insurance coverage for the various identified types of insurance purchases. Our empirical analyses are based on homeowner survey data collected from coastal residents in Florida. We find that different types of flood and wind insurance purchases are related to unique factors, which highlights the importance of distinguishing insurance purchase outcomes. We also provide policy implications that focus on specific targets to improve insurance uptake.