Insurance versus Disaster Relief: An Analysis of Interactive Modelling for Disaster Policy Planning

Abstract

This paper is concerned with ways that policy makers can plan ahead with respect to dealing with consequences of natural hazards. Despite the rash of movies highlighting dangers of earthquakes, floods, and tornados, local policy makers and community leaders view natural disasters as low priority items until after an event occurs.1 Should the damage be severe there is great concern with getting the community back on its feet and preventing disasters of a similar sort from occurring in the future. The behavior of public officials is naturally influenced by individual reactions to hazards which they face. There is considerable empirical evidence documenting the lack of interest by residents of hazardprone areas in adopting protective measures to mitigate losses or purchasing insurance voluntarily. Following a severe disaster, there is normally a clamor for disaster relief to aid uninsured victims and Congress has frequently responded with special legislation. In this sense the policy maker and individuals join forces since they both have the same objective-a speedy recovery. Petak and Atkisson have shown that the federal government, in contrast to local and state agencies, has been increasingly concerned with developing hazard mitigation policies and reducing uncertainties associated with natural disasters, but has been only partially successful in accomplishing their objectives.2 One reason for limited progress in this domain is the lack of available time to analyze and evaluate long-term planning options due to the large number of daily decisions that require immediate action. In order to change the context of policy planning, there is a need to develop interactive decision support tools that clearly enable one to evaluate the impact of alternative disaster programs on different stakeholders. In this sense the discussion in this paper supplements the approaches taken by Wallace and de Balogh3 and de Balogh and Petak4 in this volume.