1. California earthquake insurance unpopularity: the issue is the price, not the risk perception
- Author
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Philippe Guéguen, Sylvain Buisine, Adrien Pothon, Pierre-Yves Bard, Institut des Sciences de la Terre (ISTerre), Institut national des sciences de l'Univers (INSU - CNRS)-Institut de recherche pour le développement [IRD] : UR219-Université Grenoble Alpes (UGA)-Université Gustave Eiffel-Centre National de la Recherche Scientifique (CNRS)-Université Savoie Mont Blanc (USMB [Université de Savoie] [Université de Chambéry]), Centre National de la Recherche Scientifique (CNRS)-PRES Université de Grenoble-Université Joseph Fourier - Grenoble 1 (UJF)-Institut Français des Sciences et Technologies des Transports, de l'Aménagement et des Réseaux (IFSTTAR)-Institut national des sciences de l'Univers (INSU - CNRS)-Institut de recherche pour le développement [IRD] : UR219-Université Savoie Mont Blanc (USMB [Université de Savoie] [Université de Chambéry]), Institut national des sciences de l'Univers (INSU - CNRS)-Institut de recherche pour le développement [IRD] : UR219-Université Savoie Mont Blanc (USMB [Université de Savoie] [Université de Chambéry])-Centre National de la Recherche Scientifique (CNRS)-Université Gustave Eiffel-Université Grenoble Alpes (UGA), and Université Joseph Fourier - Grenoble 1 (UJF)-Institut Français des Sciences et Technologies des Transports, de l'Aménagement et des Réseaux (IFSTTAR)-Institut national des sciences de l'Univers (INSU - CNRS)-Institut de recherche pour le développement [IRD] : UR219-PRES Université de Grenoble-Université Savoie Mont Blanc (USMB [Université de Savoie] [Université de Chambéry])-Centre National de la Recherche Scientifique (CNRS)
- Subjects
Risk awareness ,lcsh:GE1-350 ,021110 strategic, defence & security studies ,Actuarial science ,010504 meteorology & atmospheric sciences ,Cover (telecommunications) ,[SDU.STU.GP]Sciences of the Universe [physics]/Earth Sciences/Geophysics [physics.geo-ph] ,lcsh:QE1-996.5 ,0211 other engineering and technologies ,lcsh:Geography. Anthropology. Recreation ,Unpopularity ,02 engineering and technology ,01 natural sciences ,lcsh:TD1-1066 ,Risk perception ,Earthquake insurance ,lcsh:Geology ,Insurance premium ,lcsh:G ,General Earth and Planetary Sciences ,Business ,lcsh:Environmental technology. Sanitary engineering ,lcsh:Environmental sciences ,0105 earth and related environmental sciences - Abstract
Despite California is a highly seismic prone region, most of homeowners are not covered against this risk. This study analyses the reasons for homeowners to purchase or not an insurance to cover earthquake losses, with application in California. A dedicated database is built from 18 different data sources about earthquake insurance, gathering data since 1921. A new model is developed to assess the take-up rate based on the homeowners’ risk awareness and the average annual insurance premium amount. Results suggest that only two extreme situations would lead all owners to cover their home with insurance: (1) a widespread belief that a devastating earthquake is imminent, or alternatively, (2) a massive decrease in the average annual premium amount by a factor exceeding 6 (from $980 to $160, USD 2015). Considering the low likelihood of each situation, we conclude from this study that new insurance solutions are necessary to fill the protection gap.
- Published
- 2019
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