Preferences for earthquake insurance in rural China: factors influencing individuals’ willingness to pay

Abstract

In 2014, China piloted its first earthquake insurance program, and the inhabitants’ demand for earthquake insurance is significant for the implementation of this plan. This study aims to identify the willingness to insure (WTI) and willingness to pay (WTP) for earthquake insurance and their influencing factors. A field survey was carried out in 2013 in pilot area, and total of 681 people were interviewed face to face. By using the contingent valuation method, we elicited people’s WTI and WTP for insurance, and the results were 88 % and 160 Yuan. We also analyzed their influencing factors using Probit and Tobit model. Regression results showed that risk perception was the leading factor associated with insurance demand, followed by risk exposure, sociodemographic elements and personal characteristics. Only one aspect of disaster experience—escape experience—had positive effect on WTI. People living in the reinforced house showed lower WTP, which verifies the adverse selection did exist. The findings pointed that rich ones and village cadres were more willing to pay for insurance, and the government propaganda for earthquake mitigation could increase ones’ WTP. In addition, some personal characteristics could also affect the WTI and WTP.