Behavioral motivations for self-insurance under different disaster risk insurance schemes

Jantsje M. Mol*, W. J.Wouter Botzen, Julia E. Blasch

*Corresponding author for this work

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This paper presents a lab-in-the-field experiment with 2111 Dutch homeowners in floodplain areas to examine the impacts of financial incentives and behavioral motivations for self-insurance under different flood insurance schemes. We experimentally varied the insurance type (mandatory public versus voluntary private) and the availability of a premium discount incentive for investing in flood damage mitigation measures. This set-up allowed us to examine the existence of moral hazard, advantageous selection and the behavioral motivations of individual agents who face these different insurance types, without the selection bias that makes a causal inference from survey studies problematic. The main results show that a premium discount can increase investments in self-insurance under both private and public insurance. Moreover, we find no support for moral hazard in our natural disaster insurance market, but we do find a substantial share of cautious people who invest both in private insurance as well as in self-insurance, indicating advantageous selection. The results have implications for the design of insurance schemes to cope with increasing natural disaster risks.

Original languageEnglish
Pages (from-to)967-991
Number of pages25
JournalJournal of Economic Behavior and Organization
Early online date22 Dec 2018
Publication statusPublished - Dec 2020


We would like to thank conference participants at ESA World Meeting 2018 and TIBER 2018 for valuable comments. This research has received financial support from the Netherlands Organisation for Scientific Research (NWO) VIDI ( 452.14.005 ) grant. Appendix A

FundersFunder number
Nederlandse Organisatie voor Wetenschappelijk Onderzoek452.14.005
Ecological Society of Australia


    • Behavioral insurance
    • Disaster damage reduction
    • Flood preparedness
    • Homeowners
    • Lab-in-the-field experiment
    • Self-insurance

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