Abstract
Flood damages that occur worldwide remain largely uninsured losses despite the efforts of governmental programs that in many cases make insurance available at below fair market cost. The current study focuses on the financial experience of the United States' National Flood Insurance Program (NFIP) from 1983 through 1993 to examine the hypothetical determinants of the flood insurance purchasing decision. The empirical analysis supports the hypotheses that income and price are influential factors in one's decision to purchase flood insurance. Flood insurance purchases at the state level are found to be highly correlated with the level of flood losses in the state during the prior year.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Anderson, Dan R. (1974). “The National Flood Insurance Program Problems and Potential, ” Journal of Risk and Insurance 41, 579–600.
Barnett, Barry J., and Jerry R. Skees. (1995). “Region and Crop Specific Models of the Demand for Federal Crop Insurance, ” Journal of Insurance Issues 19, 47–65.
Borch, Karl L. (1960). “The Safety Loading of Reinsurance Premiums, ” Skandinavian Aktuarietidskrift 162–184.
Browne, Mark J., and Kihong Kim. (1993). “An International Analysis of Life Insurance Demand, ” The Journal of Risk and Insurance 60, 616–629.
Core, John E. (1997). “On the Corporate Demand for Directors' and Officers' Insurance, ” The Journal of Risk and Insurance 64, 63–87.
Gould, John P. (1969). “The Expected Utility Hypothesis and the Selection of Optimal Deductibles for a Given Insurance Policy, ” The Journal of Business 42, 143–151.
Graff, Antonia. (1999). “Die Versicherung von Elementarrisiken im Rahmen der verbundenen Hausratund der verbundenen Wohngebaudeversicherung, ” Working Paper, University of Regensburg, Germany.
Hoyt, Robert E. (1990). “The Effect of Insurance Fraud on the Economic System, ” Journal of Insurance Regulation 8, 304–315.
Kunreuther, Howard, et al. (1978). Disaster Insurance Protection: Public Policy Lessons. New York: John Wiley.
Kunreuther, Howard. (1984). “Causes of Underinsurance against Natural Disasters, ” The Geneva Papers on Risk and Insurance 31, 206–20.
Kunreuther, Howard. (1996). “Mitigating Disaster Losses Through Insurance, ” Journal of Risk and Uncertainty 12, 171–187.
Levmore, Saul. (1996). “Coalitions and Quakes: Disaster Relief and its Prevention, ” Roundtable: University of Chicago Law School 3, 1–34.
Lewis, Tracy, and David Nickerson. (1989). “Self-Insurance against Natural Disasters, ” Journal of Environmental Economics and Management 16, 209–223.
Mayers, David, and Clifford W. Smith, Jr. (1982). “On the Corporate Demand for Insurance, ” Journal of Business 55, 190–205.
Miyazaki, Hajime. (1977). “The Rat Race and Internal Labor Markets, ” The Bell Journal of Economics 8, 394–418.
Mossin, Jan. (1968). “Aspects of Rational Insurance Purchasing, ” Journal of Political Economy 76, 553–568.
Palm, Risa, et al. (1990). Earthquake Insurance in California: Environmental Policy and Individual Decision Making. Boulder, CO: Westview Press.
Pasterick, Edward T. (1998). “The National Flood Insurance Program. ” In Howard Kunreuther and Richard J. Roth, Sr. eds., Paying the Price: The Status and Role of Insurance Against Natural Disasters in the United States. Washington, DC: Joseph Henry Press.
Pynn, Ronald, and Greta M. Ljung. (1999). “Flood Insurance: A Survey of Grand Forks, North Dakota, Homeowners, ” Applied Behavioral Science Review Forthcoming.
Raviv, Auther. (1979). “The Design of an Optimal Insurance Policy, ” American Economic Review 69, 84–96.
Rejda, George E. (1998). Principles of Risk Management and Insurance 6th ed.. Reading, MA: Addison-Wesley.
Rothschild, Michael, and Joseph Stiglitz. (1976). “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information, ” Quarterly Journal of Economics 90, 629–649.
SIGMA. (1998). “Natural ? Catastrophes and Major Losses in 1997: Exceptionally Few High Losses, ” Swiss Re, No. 3r/1998.
Smith, Vernon L. (1968). “Optimal Insurance Coverage, ” Journal of Political Economy 76, 68–77.
U.S. General Accounting Office. (1983)a. “The Effect of Premium Increases on Achieving the National Flood Insurance Program's Objectives, ” RCED83/107.
U.S. General Accounting Office. (1990). “Flood Insurance: Information on Mandatory Purchase Requirement, ” RCED-90-141FS, 8r90.
U.S. General Accounting Office. (1983)b. “National Flood Insurance Program: Major Changes Needed If It Is to Operate Without A Federal Subsidy, ” RCED-83-53, 1r83.
Vaughan, Emmett J. (1997). Risk Management. New York: John Wiley and Sons, Inc.
Viscusi, W. Kip. (1991). “Economic Theories of Decision Making Under Uncertainty: Implications for Policy Analysis. ” In David L. Weimer ed., Policy Analysis and Economics: Developments, Tensions, and Prospects. Boston: Kluwer Academic Publishers.
Wilson, Charles. (1977). “A Model of Insurance Markets with Incomplete Information” Journal of Economic Theory 97, 167–207.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Browne, M.J., Hoyt, R.E. The Demand for Flood Insurance: Empirical Evidence. Journal of Risk and Uncertainty 20, 291–306 (2000). https://doi.org/10.1023/A:1007823631497
Issue Date:
DOI: https://doi.org/10.1023/A:1007823631497