Abstract
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 language | English |
|---|---|
| Journal | Journal of Economic Behavior and Organization |
| Early online date | 22 Dec 2018 |
| DOIs | |
| Publication status | E-pub ahead of print - 22 Dec 2018 |
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Keywords
- Behavioral insurance
- Disaster damage reduction
- Flood preparedness
- Homeowners
- Lab-in-the-field experiment
- Self-insurance
Cite this
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Behavioral motivations for self-insurance under different disaster risk insurance schemes. / Mol, Jantsje M.; Botzen, W. J.Wouter; Blasch, Julia E.
In: Journal of Economic Behavior and Organization, 22.12.2018.Research output: Contribution to Journal › Article › Academic › peer-review
TY - JOUR
T1 - Behavioral motivations for self-insurance under different disaster risk insurance schemes
AU - Mol, Jantsje M.
AU - Botzen, W. J.Wouter
AU - Blasch, Julia E.
PY - 2018/12/22
Y1 - 2018/12/22
N2 - 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.
AB - 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.
KW - Behavioral insurance
KW - Disaster damage reduction
KW - Flood preparedness
KW - Homeowners
KW - Lab-in-the-field experiment
KW - Self-insurance
UR - http://www.scopus.com/inward/record.url?scp=85058794710&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85058794710&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2018.12.007
DO - 10.1016/j.jebo.2018.12.007
M3 - Article
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
ER -