Is there a demand for flood insurance in Vietnam? Results from a choice experiment

Arnaud Reynaud, Manh Hung Nguyen and Cécile Aubert
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Arnaud Reynaud: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Vietnam is one of the countries most affected by floods. Despite high exposure to this risk and repeated calls from international organizations, the penetration rate of flood insurance remains surprisingly low in Vietnam. We investigate if there is a demand for flood insurance by Vietnamese households using a choice experiment. We compute households' willingness to pay (WTP) for various flood insurance programs and we identify the relationships between WTP and the different attributes of insurance schemes (type of risk covered, level of coverage, insurance provider, billing frequency, insurance premium). We first show that Vietnamese households exhibit a strong preference for the status quo option (no insurance). We do, however, document significant and positive WTP for some flood insurance policies, especially those covering health expenses. We show that household trust in institutions providing flood insurance policies may help understand the currently low adoption rate. Finally, we stress the high degree of heterogeneity in household preferences for flood insurance policies: past experience with flooding, individual risk preferences and subjective flood risk perception matter to understand WTP for flood insurance. These results call for a very careful design of flood insurance mechanisms in Vietnam, and more generally in developing countries subject to high risks of natural disasters.

Keywords: Insurance; Flood; Vietnam; Valuation; Choice experiment (search for similar items in EconPapers)
Date: 2018-07
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Citations: View citations in EconPapers (14)

Published in Environmental Economics and Policy Studies, 2018, 20 (3), pp.593-617. ⟨10.1007/s10018-017-0207-4⟩

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Journal Article: Is there a demand for flood insurance in Vietnam? Results from a choice experiment (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03143253

DOI: 10.1007/s10018-017-0207-4

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