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Climate risk perceptions and demand for flood insurance

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  • Dimuthu Ratnadiwakara
  • Buvaneshwaran Venugopal

Abstract

The demand for flood insurance is low when the frequency and severity of flood disasters are increasing due to climate change. We show that beliefs about climate change influence homeowners' choice and level of flood insurance coverage. The demand for voluntary flood insurance coverage for homes and contents is higher in areas with more people who are worried about global warming. Property‐level analysis shows that individuals are more likely to terminate flood insurance after unanticipated premium increases if they do not perceive climate change as a risk. We use the heterogeneous impact of widening partisan polarization on climate change beliefs to rule out alternative explanations.

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  • Dimuthu Ratnadiwakara & Buvaneshwaran Venugopal, 2023. "Climate risk perceptions and demand for flood insurance," Financial Management, Financial Management Association International, vol. 52(2), pages 297-331, June.
    • Handle: RePEc:bla:finmgt:v:52:y:2023:i:2:p:297-331
    DOI: 10.1111/fima.12414
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