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NGI News

NGI-funded Research Published in Land Economics Journal

May 6, 2013

NGI researchers, Drs. Dan Petrolia and Keith Coble, both of Mississippi State University, have recently completed research about  homeowners' participation in the National Flood Insurance Program.  "Risk Preferences, Risk Perceptions, and Flood Insurance" is the article that has been published in the journal, Land Economics.   Dr. Craig Landry of East Carolina University in Greenville, was also a contributing author.

Even though legislation has required flood insurance be bought for Special Flood Hazard Areas (SFHA), participation rates remain relatively low, and participation is still not universal even among properties where mandatory purchase provisions apply.  In an effort to determine the reasoning for such low participation, this research project has attempted to establish what factors determine the decision to purchase a flood policy.

The Abstract for the journal article is as follows:

We combine household-level data on the choice to purchase flood insurance with experiment-based risk preference data and subjective risk perception data. The sample covers a wide geographic area (the entire U.S. Gulf Coast and Florida's Atlantic Coast) and includes individuals exposed to varying levels of risk. This work represents one of very few analyses to do so. Results indicate that our experiment-based measure of risk aversion over the loss domain positively and significantly correlates with the decision to purchase a flood policy, as do perceived expectations of hurricane damage, eligibility for disaster assistance, and credibility of insurance providers.

To review the entire manuscript, you may visit University of Wisconsin Press publisher of Land Economics.