The Impact of a Government Risk Pool and an Opt-Out Framing on Demand for Earthquake Protection

Howard Kunreuther, Lynn Conell-Price, Paul Kovacs and Katsuichiro Goda

No 29144, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper describes the design and analysis of a web-based choice experiment that examines how the demand for earthquake protection in Quebec and British Columbia is influenced by the default option and the structure of the insurance plan. Homeowners in both provinces were given the opportunity to purchase protection against earthquake losses when presented with one of the following options: the current private insurance plan, a high deductible private insurance plan, and a proposed public-private risk pool. The default frame was changed so the homeowner could either opt-in by purchasing this coverage or opt-out of being given this protection and receiving a premium discount. Assigning participants to a public-private risk pool rather than the current private insurance plan increases the likelihood of purchasing earthquake protection by 151%. The opt-out frame leads to a likelihood greater than 1.6 of purchasing coverage relative to the opt-in frame when given the same plan structure. The policy implications of this finding are discussed.

JEL-codes: D81 G22 H12 H44 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-ias and nep-isf
Note: PE
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