Advanced Search
MyIDEAS: Login

Microinsurance Demand After a Rare Flood Event: Evidence From a Field Experiment in Pakistan

Contents:

Author Info

  • Ginger Turner

    (Swiss Re, New York, NY and Wharton Risk Center, University of Pennsylvania, Philadelphia, PA, U.S.A)

  • Farah Said

    (Lahore School of Economics, Lahore, Pakistan)

  • Uzma Afzal

    (Lahore School of Economics, Lahore, Pakistan)

Registered author(s):

    Abstract

    This paper examines the characteristics that determine demand for microinsurance when individuals have personal or observed experience with a rare weather event: the severe 2010 flooding in Pakistan. Using a sample of 384 individuals (192 in flood-affected and 192 non-affected villages matched using pre-flood propensity data), we combine post-flood survey data with behavioural experiments to test the impact of prior loss experience on willingness to purchase insurance. In the framed experiment setting, we allow participants to choose insurance payments through many rounds of random flood losses, testing whether experiment behaviour is significantly related to real-world experience or observation and whether individuals change insurance demand after experiencing losses. We find that 2010 flood-affected individuals demand significantly more insurance than non-affected individuals, and that both personal losses and observations of others’ losses are significant determinants of demand, when controlling for location-specific flood propensity, pre-flood mitigation, information sources, post-flood assistance, exogenous changes in assets, potential migrant attrition and other household characteristics. Having prior experience with less severe floods before the 2010 event also increases insurance demand, although the effect disappears when controlling for 2010 flood. Contrary to expectation, household beliefs that insurance is non-Islamic are not found to be a significant barrier to take-up.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.palgrave-journals.com/gpp/journal/v39/n2/pdf/gpp20148a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/gpp/journal/v39/n2/full/gpp20148a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

    Volume (Year): 39 (2014)
    Issue (Month): 2 (April)
    Pages: 201-223

    as in new window
    Handle: RePEc:pal:gpprii:v:39:y:2014:i:2:p:201-223

    Contact details of provider:
    Web page: http://www.palgrave-journals.com/

    Order Information:
    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
    Email:
    Web: http://www.palgrave-journals.com/pal/subscribe/index.html

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Kunreuther, Howard & Pauly, Mark, 2006. "Insurance Decision-Making and Market Behavior," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(2), pages 63-127, April.
    2. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    3. Sendhil Mullainathan, 2002. "A Memory-Based Model Of Bounded Rationality," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 735-774, August.
    4. Kaplow, Louis, 1991. " Incentives and Government Relief for Risk," Journal of Risk and Uncertainty, Springer, vol. 4(2), pages 167-75, April.
    5. Tatyana Deryugina, 2013. "How do people update? The effects of local weather fluctuations on beliefs about global warming," Climatic Change, Springer, vol. 118(2), pages 397-416, May.
    6. Erwann O. Michel-Kerjan & Carolyn Kousky, 2010. "Come Rain or Shine: Evidence on Flood Insurance Purchases in Florida," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(2), pages 369-397.
    7. Francisco Galarza & Michael Carter, 2011. "Risk Preferences and Demand for Insurance in Peru: A Field Experiment," Working Papers 11-08, Departamento de Economía, Universidad del Pacífico, revised Jan 2011.
    8. Lisa Cameron & Manisha Shah, 2013. "Risk-Taking Behavior in the Wake of Natural Disasters," NBER Working Papers 19534, National Bureau of Economic Research, Inc.
    9. Arnaud Reynaud & C�cile Aubert & Manh-Hung Nguyen, 2013. "Living with Floods: Protective Behaviours and Risk Perception of Vietnamese Households," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 38(3), pages 547-579, July.
    10. Grislain-Letrémy, Céline, 2013. "Natural Disasters: Exposure and Underinsurance," Economics Papers from University Paris Dauphine 123456789/13276, Paris Dauphine University.
    11. Hans Binswanger, 1981. "Attitudes toward risk: Theoretical implications of an experiment in rural india," Artefactual Field Experiments 00010, The Field Experiments Website.
    12. Gustavo Adolfo Caballero Orozco, 2010. "Risk Preferences Under Extreme Poverty: A Field Experiment," DOCUMENTOS CEDE 007717, UNIVERSIDAD DE LOS ANDES-CEDE.
    13. Shawn Cole & Xavier Giné & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2009. "Barriers to household risk management: evidence from India," Staff Reports 373, Federal Reserve Bank of New York.
    14. Maarten Voors & Eleonora Nillesen & Philip Verwimp & Erwin Bulte & Robert Lensink & Daan van Soest, 2010. "Does Conflict affect Preferences? Results from Field Experiments in Burundi," Research Working Papers 21, MICROCON - A Micro Level Analysis of Violent Conflict.
    15. Fleming, David A. & Chong, Alberto E. & Bejarano, Hernan D., 2011. "Do Natural Disasters Affect Trust/Trustworthiness? Evidence from the 2010 Chilean Earthquake," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104522, Agricultural and Applied Economics Association.
    16. Arun, Thankom & Bendig, Mirko & Arun, Shoba, 2012. "Bequest Motives and Determinants of Micro Life Insurance in Sri Lanka," World Development, Elsevier, vol. 40(8), pages 1700-1711.
    17. Eckel, Catherine C. & El-Gamal, Mahmoud A. & Wilson, Rick K., 2009. "Risk loving after the storm: A Bayesian-Network study of Hurricane Katrina evacuees," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 110-124, February.
    18. Mahul, Olivier & Wright, Brian D., 2007. "Optimal coverage for incompletely reliable insurance," Economics Letters, Elsevier, vol. 95(3), pages 456-461, June.
    19. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
    20. Daniel R. Petrolia & Craig E. Landry & Keith H. Coble, 2013. "Risk Preferences, Risk Perceptions, and Flood Insurance," Land Economics, University of Wisconsin Press, vol. 89(2), pages 227-245.
    21. Andrabi, Tahir & Das, Jishnu, 2010. "In aid we trust : hearts and minds and the Pakistan earthquake of 2005," Policy Research Working Paper Series 5440, The World Bank.
    22. Yanos Zylberberg, 2010. "Do tropical typhoons smash community ties? Theory and evidence from Vietnam," PSE Working Papers halshs-00564941, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:39:y:2014:i:2:p:201-223. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Gale).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.