Innovations in Earthquake and Natural Hazards Research: Hazards Insurance

摘要

Results are presented of an investigation of the decisionmaking processes of consumers in purchasing hazards insurance. Three-thousand households in hazard-prone areas were surveyed; laboratory experiments examining individual decisionmaking behavior were performed; and a computer model was developed to study the relative benefits and costs of hazard mitigation and recovery programs. The principal finding was that individuals were not concerned with events whose probability was below some threshold. People were willing to insure against less serious situations of higher probability of occurrence, rather than to insure against more serious potential losses with a lower probability of occurrence. It was concluded that the consumer did not follow a rational process in considering hazards insurance and, for this reason, was the source of market failure. It was suggested that voluntary insurance programs, or even highly subsidized ones, were unlikely to succeed on a large scale, and that other institutional changes would be needed if increases in disaster insurance were desired.