Do Perverse Insurance Incentives Encourage Coastal Vulnerability?
Publication: Natural Hazards Review
Volume 23, Issue 1
Abstract
Subsidized insurance is often described as a perverse incentive, moral hazard, or maladaptation that perpetuates coastal residencies in vulnerable homes despite increasing safety and economic risks from hurricanes, sea level rise, and other climate change impacts. Insurance is also often described as a positive factor in coastal risk reduction if insurers proactively reward homeowners for upgrades that mitigate losses from hurricanes. The empirical and policy-relevant question remains whether homeowners perceive insurance incentives as perverse or positive. A new survey of 662 North Carolina coastal homeowners shows that most are failing to upgrade their homes to address hurricane risk or plan for coastal retreat but not because they expect insurance to cover losses. Rather those aware of insurance incentives are more likely to live in better-protected residences and take the incentivized actions. Limited awareness of existing policies suggests a need for greater outreach by policymakers, lenders, and insurers.
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Data Availability Statement
Some or all data, models, or code generated or used during the study are proprietary or confidential in nature and may only be provided with restrictions. Specifically, respondents’ names, addresses, and home coordinates (latitude, longitude) are confidential and cannot be shared in accordance with the human subjects research protocol approved by the University of Notre Dame Institutional Review Board. All other deidentified data, models, or code generated or used during the study will be made available upon reasonable request to the corresponding author.
Acknowledgments
The authors gratefully acknowledge the financial support of Notre Dame’s Environmental Change Initiative (ECI) and its Global Adaptation Index (ND-GAIN) for the pilot of the Coastal Homeowner Survey in New Hanover County, North Carolina. The authors recognize the ongoing collaboration with the Insurance Institute for Business and Home Safety (IBHS) and with their partnering survey research firm, SSRS. The first author recognizes the support of the Andrew W. Mellon New Directions Fellowship for training in ecology and environmental law and the Notre Dame Institute for Advanced Study (NDIAS) for providing the time, space, and engaged community essential to writing.
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Published In
Natural Hazards Review
Volume 23 • Issue 1 • February 2022
Copyright
© 2021 American Society of Civil Engineers.
History
Received: Oct 8, 2020
Accepted: Sep 19, 2021
Published online: Nov 2, 2021
Published in print: Feb 1, 2022
Discussion open until: Apr 2, 2022
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