IDEAS home Printed from https://ideas.repec.org/a/sae/anname/v604y2006i1p208-227.html
   My bibliography  Save this article

Disaster Mitigation and Insurance: Learning from Katrina

Author

Listed:
  • Howard Kunreuther

    (Risk Management and Decision Processes Center at the Wharton School of the University of Pennsylvania)

Abstract

Hurricane Katrina illustrates the natural disaster syndrome . Prior to a disaster, individuals in hazard-prone regions do not voluntarily adopt cost-effective loss reduction measures. The federal government then comes to the rescue with disaster assistance even if it claimed it had no intention of doing so prior to the event. There are a number of reasons why individuals do not protect themselves prior to a disaster. They underestimate the likelihood of a future disaster, often believing that it will not happen to them; have budget constraints; are myopic in their behavior; and/or do not want to be the only one on the block modifying their structure. Given this lack of interest in voluntary protection, benefit-cost analysis can determine when a well-enforced building code would be appropriate. The article concludes by highlighting the importance of public-private partnerships as a way of reducing future disaster losses and aiding the recovery process.

Suggested Citation

  • Howard Kunreuther, 2006. "Disaster Mitigation and Insurance: Learning from Katrina," The ANNALS of the American Academy of Political and Social Science, , vol. 604(1), pages 208-227, March.
  • Handle: RePEc:sae:anname:v:604:y:2006:i:1:p:208-227
    DOI: 10.1177/0002716205285685
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0002716205285685
    Download Restriction: no

    File URL: https://libkey.io/10.1177/0002716205285685?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Schkade David A. & Payne John W., 1994. "How People Respond to Contingent Valuation Questions: A Verbal Protocol Analysis of Willingness to Pay for an Environmental Regulation," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 88-109, January.
    2. Luce, Mary Frances & Kahn, Barbara E, 1999. "Avoidance or Vigilance? The Psychology of False-Positive Test Results," Journal of Consumer Research, Oxford University Press, vol. 26(3), pages 242-259, December.
    3. Hogarth, Robin M & Kunreuther, Howard, 1995. "Decision Making under Ignorance: Arguing with Yourself," Journal of Risk and Uncertainty, Springer, vol. 10(1), pages 15-36, January.
    4. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    5. Heath, Chip & Soll, Jack B, 1996. "Mental Budgeting and Consumer Decisions," Journal of Consumer Research, Oxford University Press, vol. 23(1), pages 40-52, June.
    6. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. "Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
    7. Paul R. Kleindorfer & Howard Kunreuther, 1999. "The Complementary Roles of Mitigation and Insurance in Managing Catastrophic Risks," Risk Analysis, John Wiley & Sons, vol. 19(4), pages 727-738, August.
    8. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    9. Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robin C. Van den Honert, 2016. "Improving Decision Making about Natural Disaster Mitigation Funding in Australia—A Framework," Resources, MDPI, vol. 5(3), pages 1-23, September.
    2. Yingmei Tang & Huifang Cai & Rongmao Liu, 2022. "Will marketing strategies affect farmers’ preferences and willingness to pay for catastrophe insurance? Evidence from a choice experiment in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(1), pages 1376-1389, January.
    3. Kalfin & Sukono & Sudradjat Supian & Mustafa Mamat, 2022. "Insurance as an Alternative for Sustainable Economic Recovery after Natural Disasters: A Systematic Literature Review," Sustainability, MDPI, vol. 14(7), pages 1-18, April.
    4. Nathan Blascak & Ying Lei Toh, 2022. "Prior Fraud Exposure and Precautionary Credit Market Behavior," Working Papers 22-36, Federal Reserve Bank of Philadelphia.
    5. Jennifer Oetzel & Chang Hoon Oh, 2021. "A storm is brewing: Antecedents of disaster preparation in risk prone locations," Strategic Management Journal, Wiley Blackwell, vol. 42(8), pages 1545-1570, August.
    6. Maruyama Rentschler,Jun Erik & Avner,Paolo & Marconcini,Mattia & Su,Rui & Strano,Emanuele & Bernard,Louise Alice Karine & Riom,Capucine Anne Veronique & Hallegatte,Stephane, 2022. "Rapid Urban Growth in Flood Zones : Global Evidence since 1985," Policy Research Working Paper Series 10014, The World Bank.
    7. Mona Ahmadiani & Susana Ferreira & Craig E. Landry, 2019. "Flood Insurance and Risk Reduction: Market Penetration, Coverage, and Mitigation in Coastal North Carolina," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1058-1082, April.
    8. Dingde Xu & Enlai Liu & Xuxi Wang & Hong Tang & Shaoquan Liu, 2018. "Rural Households’ Livelihood Capital, Risk Perception, and Willingness to Purchase Earthquake Disaster Insurance: Evidence from Southwestern China," IJERPH, MDPI, vol. 15(7), pages 1-19, June.
    9. Vladimir M. Cvetković & Giulia Roder & Adem Öcal & Paolo Tarolli & Slavoljub Dragićević, 2018. "The Role of Gender in Preparedness and Response Behaviors towards Flood Risk in Serbia," IJERPH, MDPI, vol. 15(12), pages 1-21, December.
    10. Raymond J. Burby, 2006. "Hurricane Katrina and the Paradoxes of Government Disaster Policy: Bringing About Wise Governmental Decisions for Hazardous Areas," The ANNALS of the American Academy of Political and Social Science, , vol. 604(1), pages 171-191, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Howard Kunreuther & Erwann Michel-Kerjan, 2015. "Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 171-194, October.
    2. David H. Krantz & Howard C. Kunreuther, 2007. "Goals and plans in decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 137-168, June.
    3. Erwann Michel‐Kerjan & Sabine Lemoyne de Forges & Howard Kunreuther, 2012. "Policy Tenure Under the U.S. National Flood Insurance Program (NFIP)," Risk Analysis, John Wiley & Sons, vol. 32(4), pages 644-658, April.
    4. Mona Ahmadiani & Susana Ferreira & Craig E. Landry, 2019. "Flood Insurance and Risk Reduction: Market Penetration, Coverage, and Mitigation in Coastal North Carolina," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1058-1082, April.
    5. Philip Ganderton & David Brookshire & Michael McKee & Steve Stewart & Hale Thurston, 2000. "Buying Insurance for Disaster-Type Risks: Experimental Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 271-289, May.
    6. Howard Kunreuther & Geoffrey Heal, 2012. "Managing Catastrophic Risk," NBER Working Papers 18136, National Bureau of Economic Research, Inc.
    7. 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.
    8. Daniel Sutter & Marc Poitras, 2010. "Do people respond to low probability risks? Evidence from tornado risk and manufactured homes," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 181-196, April.
    9. Carolyn Kousky & Erwann Michel-Kerjan, 2017. "Examining Flood Insurance Claims in the United States: Six Key Findings," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(3), pages 819-850, September.
    10. Peter John Robinson & W. J. Wouter Botzen, 2018. "The impact of regret and worry on the threshold level of concern for flood insurance demand: Evidence from Dutch homeowners," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 13(3), pages 237-245, May.
    11. Marielle Brunette & Laure Cabantous & Stéphane Couture & Anne Stenger, 2008. "Insurance Demand for Disaster-type Risks and the Separation of Attitudes toward Risk and Ambiguity: an Experimental Study," Working Papers - Cahiers du LEF 2008-05, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
    12. Howard Kunreuther & Mark Pauly, 2006. "Rules Rather Than Discretion: Lessons from Hurricane Katrina," NBER Working Papers 12503, National Bureau of Economic Research, Inc.
    13. Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," Theory and Decision, Springer, vol. 64(2), pages 173-192, March.
    14. Surminski, Swenja & Eldridge, Jillian, 2015. "Flood insurance in England: an assessment of the current and newly proposed insurance scheme in the context of rising flood risk," LSE Research Online Documents on Economics 66256, London School of Economics and Political Science, LSE Library.
    15. Andrea Morone & Ozlem Ozdemir, 2006. "Valuing Protection against Low Probability, High Loss Risks: Experimental Evidence," Papers on Strategic Interaction 2006-34, Max Planck Institute of Economics, Strategic Interaction Group.
    16. Craig E. Landry & Mohammad R. Jahan‐Parvar, 2011. "Flood Insurance Coverage in the Coastal Zone," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(2), pages 361-388, June.
    17. Hasson, Reviva & Löfgren, Åsa & Visser, Martine, 2010. "Climate change in a public goods game: Investment decision in mitigation versus adaptation," Ecological Economics, Elsevier, vol. 70(2), pages 331-338, December.
    18. Michael G. Pollitt & Irina Shaorshadze, 2013. "The role of behavioural economics in energy and climate policy," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 24, pages 523-546, Edward Elgar Publishing.
    19. Stephane Hallegatte, 2017. "A Normative Exploration of the Link Between Development, Economic Growth, and Natural Risk," Economics of Disasters and Climate Change, Springer, vol. 1(1), pages 5-31, June.
    20. Tsvetan Tsvetanov & Kathleen Segerson, 2014. "The Welfare Effects of Energy Efficiency Standards When Choice Sets Matter," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 233-271.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:anname:v:604:y:2006:i:1:p:208-227. 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: . General contact details of provider: .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.