Willingness To Pay For Insurance Research Articles

Risk Attitudes to Catastrophic Events: VSL and WTP for Insurance Against Earthquakes

The purpose of the paper is to investigate the attitude to risk related to low-probability, high-impact events. To do this, we compare the willingness to pay (WTP) to reduce mortality risks and the WTP for life insurance against earthquakes. We explore whether risk perception affects these measures, and exploit WTP to reduce risk of fatality to calculate the Value of a Statistical Life (VSL) related to seismic events. We rely on data from a survey administered to a representative sample of the Italian population. Our results highlight that the WTP to reduce mortality risk is lower than the WTP for life insurance, and that the correlations between risk perception and these two measures differ. The findings suggest that individuals’ preferences are directed toward risk management strategies in which the mortality risk is transferred to the capital market, rather than risk mitigation strategies involving the individual in sharing the costs and benefits with all of society.

German farmers’ acceptance of subsidized insurance associated with reduced direct payments

PurposeThe outstanding reform of the Common Agriculture Policy allows for changes regarding its most criticized component, the direct payment scheme. The purpose of this paper is to investigate farmers’ acceptance of subsidized whole farm income insurance (WFI) and single-crop, multi-peril revenue insurance (RI) that are associated with a reduction of direct payments.Design/methodology/approachBy applying a generalized multinomial logit model on data of a discrete choice experiment, German farmers’ preferences, expressed as their willingness to pay (WTP), for WFI and RI are revealed.FindingsThe results show a positive WTP for WFI and RI. The average farmer has a higher WTP for WFI than for RI. By increasing the coverage level, the negative influence of a reduction of direct payments on WTP for insurance can be compensated. Individual risk attitude and assessed importance of direct payments for the farm business show a statistically significant influence on the WTP.Practical implicationsThe results suggest that, even if direct payments were abolished in order to subsidize WFI or RI, German farmers’ WTP for both insurance products would remain positive. However, to finally assess whether subsidizing insurance is the right means of providing public support, it is necessary to assess whether farmers’ WTP meets the costs for such an insurance scheme.Originality/valueTo the authors’ knowledge, this is the first study investigating German farmers’ WTP for WFI and RI using an experimental approach by explicitly considering the partial to complete replacement of direct payments by subsidized insurance.

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

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.

Influence of flood risk characteristics on flood insurance demand: a comparison between Germany and the Netherlands

Abstract. The existence of sufficient demand for insurance coverage against infrequent losses is important for the adequate function of insurance markets for natural disaster risks. This study investigates how characteristics of flood risk influence household flood insurance demand based on household surveys undertaken in Germany and the Netherlands. Our analyses confirm the hypothesis that willingness to pay (WTP) for insurance against medium-probability medium-impact flood risk in Germany is higher than WTP for insurance against low-probability high-impact flood risk in the Netherlands. These differences in WTP can be related to differences in flood experience, individual risk perceptions, and the charity hazard. In both countries there is a need to stimulate flood insurance demand if a relevant role of private insurance in flood loss compensation is regarded as desirable, for example, by making flood insurance compulsory or by designing information campaigns.

Fishermen Willingness to Participate in an Insurance Program in Oman

This study is based on a survey of 210 fishermen in Oman to investigate their willingness to pay (WTP) for and enroll in an insurance scheme. The survey was designed to evaluate fishermen's willingness to adopt a safety measures program. Most fishermen showed a low level of prudence except for community controlled measures. Actually, 82% of fishermen fish in groups rather than individually, 98% inform their families about the site where they are going to fish, and 76% listen to the weather forecast before leaving. A linear and a Logit model were used in this study. Results from the linear model show that virtually all the socioeconomic, boat characteristics, attitudinal, and wealth variables are important in explaining the amount of the insurance premium the fishermen are willing to pay for; however, only a few variables were significant in the Logit model. Overall, 52% of the respondents indicated WTP for insurance, which is a clear indication that the demand for insurance is substantial. The estimated annual insurance premium varies between Rials Omani (RO) 23.13 and RO 29.25, depending on whether it is a voluntary or legally required. WTP is estimated at RO 18.7.