Why Don’t Consumers Purchase Flood Insurance or Mitigate Flood Risk?

Michael LaCour-Little, Mark Palim and Ying Pan

Journal of Housing Research, 2025, vol. 34, issue 1, 60-89

Abstract: We employed survey research to test the role of behavioral biases and consumer awareness in the demand for flood insurance and property risk mitigation. We relied on Meyer and Kunreuther (2017), who identified six biases—inertia, amnesia, myopia, simplification, optimism, and herding—as factors that impede rational decision-making regarding disaster preparedness. We tested proxies for these biases and find negative associations between those measures and household decisions. We also found that lack of awareness about flood risk and insurance options was an even stronger predictor of inaction than were our bias measures. This suggests that boosting consumer awareness may counter the influence of behavioral biases. We conclude by describing strategies that may increase consumer awareness and mitigate the behavioral biases examined.

Date: 2025
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DOI: 10.1080/10527001.2024.2425230

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