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Insurance, public assistance and household flood risk reduction: a comparative study of Austria, England and Romania

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Listed:
  • Hanger, Susanne
  • Bayer, Joanne
  • Surminski, Swenja
  • Nenciu, Cristina
  • Lorant, Anna
  • Ionescu, Radu
  • Patt, Anthony

Abstract

In light of increasing losses from floods many researchers and policy makers are looking for ways to encourage flood risk reduction among communities, business, and households. In this study we investigate risk reduction behavior at the household level in three European Union (EU) Member States with fundamentally different insurance and compensation schemes. We try to understand if and how insurance and public assistance influence private risk reduction behavior. Data was collected using a telephone survey (n=1,849) of household decision makers in flood-prone areas. We show that insurance overall is positively associated with private risk reduction behavior. Warranties, premium discounts, and information provision with respect to risk reduction may be an explanation for this positive relationship in the case of structural measures. Public incentives for risk-reduction measures by means of financial and in-kind support, and particularly through the provision of information are also associated with enhancing risk reduction. In this study public compensation is not negatively associated with private risk reduction behavior. This does not disprove such a relationship, but the negative effect may be mitigated by factors related to respondent’s capacity to implement measures or social norms that were not included in the analysis. The data suggests that large-scale flood protection infrastructure creates a sense of security that is associated with a lower level of preparedness. Across the board there is ample room to improve both public and private policies to provide effective incentives for household level risk reduction.

Suggested Citation

  • Hanger, Susanne & Bayer, Joanne & Surminski, Swenja & Nenciu, Cristina & Lorant, Anna & Ionescu, Radu & Patt, Anthony, 2017. "Insurance, public assistance and household flood risk reduction: a comparative study of Austria, England and Romania," LSE Research Online Documents on Economics 83634, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:83634
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    References listed on IDEAS

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    1. Wim Kellens & Teun Terpstra & Philippe De Maeyer, 2013. "Perception and Communication of Flood Risks: A Systematic Review of Empirical Research," Risk Analysis, John Wiley & Sons, vol. 33(1), pages 24-49, January.
    2. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    3. David Crichton, 2008. "Role of Insurance in Reducing Flood Risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(1), pages 117-132, January.
    4. Torsten Grothmann & Fritz Reusswig, 2006. "People at Risk of Flooding: Why Some Residents Take Precautionary Action While Others Do Not," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 38(1), pages 101-120, May.
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    Cited by:

    1. Seyed Javad Hashemi & Faisal Khan & Salim Ahmed, 2019. "An Insurance Model for Risk Management of Process Facilities," Risk Analysis, John Wiley & Sons, vol. 39(3), pages 713-728, March.

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    More about this item

    Keywords

    flood insurance; public incentive; moral hazard; risk reduction; climate change adaptation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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