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Feeling Is Believing? Evidence From Earthquake Shaking Experience and Insurance Demand

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  • Xiao Lin

Abstract

This article investigates how a particular type of personal experience—“no‐loss” experience with minor earthquakes—affects financial decisions such as insurance purchases. We find a small temporary increase in insurance demand in areas that experience a shaking with moderate intensity, or multiple shakings with light intensity. An analysis of Google Trends data confirms an immediate increase in interest in insurance though not in seismic retrofit. These findings extend the applicability of the availability bias and hot‐hand fallacy to a broader context: financial decisions may be motivated by not only loss experience, but also recent no‐loss experience, as people may extrapolate their “feeling” to something worse. However, such experience does not motivate long‐term behavioral change.

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  • Xiao Lin, 2020. "Feeling Is Believing? Evidence From Earthquake Shaking Experience and Insurance Demand," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(2), pages 351-380, June.
    • Handle: RePEc:bla:jrinsu:v:87:y:2020:i:2:p:351-380
    DOI: 10.1111/jori.12291
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    4. Manqing Wu & Guochun Wu, 2020. "An Analysis of Rural Households’ Earthquake-Resistant Construction Behavior: Evidence from Pingliang and Yuxi, China," IJERPH, MDPI, vol. 17(23), pages 1-14, December.
    5. Pedro Brandão Graminha & Luís Eduardo Afonso, 2022. "Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(5), pages 200421-2004.
    6. Eiji Yamamura & Yoshiro Tsutsui, 2021. "How does COVID-19 change insurance and vaccine demand? Evidence from short-panel data in Japan," Papers 2101.08922, arXiv.org.
    7. Yiru Wang, 2023. "Famine and matching by socioeconomic status—evidence from the Great Chinese Famine," Review of Economics of the Household, Springer, vol. 21(3), pages 855-912, September.

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