What drives households to buy flood insurance? New evidence from Georgia

Ajita Atreya, Susana Ferreira and Erwann Michel-Kerjan

Ecological Economics, 2015, vol. 117, issue C, 153-161

Abstract: Benefiting from access to detailed data on the federally run National Flood Insurance Program for the entire state of Georgia, USA, we analyze residential flood insurance purchasing behavior in that state over more than three decades (1978–2010). The demand for flood insurance on an extensive margin, based on take-up rates, is found to be relatively price inelastic. Aligned with the behavioral economics literature, recent flood events temporarily increase purchases, but this effect fades after 3years. We also find that the proportion of developed area in floodplains has a significant positive impact on insurance take-up rates. Contrary to what is often assumed, we do not find evidence that insurance purchase and mitigation efforts are substitutes. Educated individuals, individuals over the age of 45, and African-Americans are, all else equal, more likely to purchase flood insurance.

Keywords: Floods; Disaster insurance; NFIP; Race; Georgia (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:117:y:2015:i:c:p:153-161

DOI: 10.1016/j.ecolecon.2015.06.024

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