Disaster Aid and Support for Mandatory Insurance: Evidence from a Survey Experiment

Dealing with the consequences of climate change will put an increasing burden on public and private finances. We use the example of floods in a survey experiment among 8,000 German households to elicit households’ preferences for climate adaptation policies. In Germany, as in many countries, we observe low flood insurance penetration in combination with high ex-post state aid in the event of large disasters. We find that prior expectations of flood aid, conditional on severe flooding, are low. After learning about high ex-post flood aid, households adjust their aid expectations upwards and increase their support for a mandatory flood insurance scheme. We show that the latter result is driven by fairness concerns, with reactions being stronger among uninsured households in low-risk areas. In contrast, information about announcements to cut flood aid does not significantly alter expectations and views. We conclude that fairness concerns are relevant in the discussion of public and private responsibilities in dealing with climate change.