![]() ![]() In the same study (Kunreuther et al., 1978), a numerical model was developed, at the same granularity, failing however to accurately reproduce the observed behaviours. Kunreuther et al. (1978) first proposed a sequential model showing that the individual's purchasing behaviour depends on personal risk perception, premium amount and knowledge of insurance solutions. With limits in earthquake insurance consumption identified, the next step is to assess the contribution of each factor to the take-up rate. Consequently, earthquake insurance purchasing behaviour is correlated with personal understanding of seismic risk and is not only related to scientific-based hazard level (Palm and Hodgson, 1992a Palm, 1995 Wachtendorf and Sheng, 2002). Indeed, most of them disregard this risk because it is seldom, even if destructive earthquake experiences foster insurance underwriting during the following year (Buffinton, 1961 Kunreuther et al., 1978 Meltsner, 1978 Lin, 2015). Since homeowners are aware of the destructive potential of a major earthquake, the risk perception reflects their personal estimate of the occurrence (Kunreuther et al., 1978 Wachtendorf and Sheng, 2002). Both high deductible amount (Meltsner, 1978 Palm and Hodgson, 1992b Burnett and Burnett, 2009) and underestimated total reconstruction cost (Garatt and Marshall, 2003) can make insured people feel unprotected after an earthquake, making this kind of insurance disrepute. As reported by Marquis et al. (2017) after the 2010–2011 Canterbury (NZL) earthquakes, this amount can be inadequate for the actual repair costs. However, Porter et al. (2004) have shown that taking into account earthquake risk for calculating the building's net asset value can have a significant impact in earthquake-prone areas like California.Īlso, people insured against earthquake risk can receive a compensation lower than the loss incurred because most earthquake insurance policies in California include a deductible amount (i.e. at the charge of the policyholder) and are calibrated based on a total reconstruction cost, declared by the policyholder. Still, lenders for commercial mortgages are used to requiring earthquake insurance only when the probable maximum loss is high (Porter et al., 2004). Moreover, earthquake insurance is not mandatory in California for residential mortgage (CDI, 2019, Information Guides, Earthquake Insurance). ![]() Indeed, based on data from the World Housing Encyclopedia, Pothon et al. (2018) have shown that building construction price is not correlated to the seismic vulnerability rating. Pricing methods used in the real estate market do not take into account seismic risk. Several other socio-economic factors (e.g. the duration of residence, the neighbours' behaviour, the communication strategies of mass media, real estate agencies and insurance companies) have an impact on the risk perception (Meltsner, 1978 Palm and Hodgson, 1992a Lin, 2013). As they are not expecting much from federal aids, they do not know how they will recover (Kunreuther et al., 1978).Ĭonsequently the decision to purchase insurance to cover earthquake losses is not correlated to the income level (Kunreuther et al., 1978 Wachtendorf and Sheng, 2002). Nevertheless, even uninsured homeowners tend to overestimate the loss they would face in case of a major event and feel vulnerable regardless of their income level (Kunreuther et al., 1978 Palm and Hodgson, 1992a). For the premium amount, both a survey conducted by Meltsner (1978) and the statistics collected from insurance data by Buffinton (1961) and Latourrette et al. (2010) show, as expected, a negative correlation between the premium amount and the insurance adoption. Three main variables have been observed as decisive in purchasing an earthquake insurance: the premium amount, the socio-economic background and the risk perception (Kunreuther et al., 1978 Palm and Hodgson, 1992a Wachtendorf and Sheng, 2002). Consequently, several studies have already investigated homeowners' behaviour regarding earthquake insurance in California, in order to identify people who might have an interest in purchasing earthquake insurance and to understand why they do not do so. ![]() Such a low rate is surprising in a rich area prone to earthquake risk. Since 2002, the rate of homeowners insured against earthquake risk in California has never exceeded 16 %, according to data provided by the California Department of Insurance (CDI, 2017b, California Insurance Market Share Reports). ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |