IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v47y2022i1d10.1057_s41288-021-00248-0.html
   My bibliography  Save this article

Setting descriptive norm nudges to promote demand for insurance against increasing climate change risk

Author

Listed:
  • Peter John Robinson

    (VU University Amsterdam)

  • W. J. Wouter Botzen

    (VU University Amsterdam
    Utrecht University
    University of Pennsylvania)

Abstract

Natural disaster losses are projected to increase worldwide, in part due to climate change. As well as offering financial protection against the impacts of climate change, insurers can promote behavioural change by stimulating individuals’ preparedness choices. Norm nudges aim to improve preparedness for risks through information provision that appeals to social norms. Based on data collected in an online experiment among homeowners, we tested for the influence on flood insurance demand of providing individuals with a norm nudge about the flood insurance purchase decisions of their neighbours. Potential moderators of the effectiveness of this norm nudge were examined, such as whether the norm is consistent with homeowners’ prior beliefs as well as whether homeowners trust insurance agents, who are used as the messenger of the norm. Based on this investigation, we suggest recommendations for policies that aim to improve preparedness against increasing losses related to climate change.

Suggested Citation

  • Peter John Robinson & W. J. Wouter Botzen, 2022. "Setting descriptive norm nudges to promote demand for insurance against increasing climate change risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(1), pages 27-49, January.
    • Handle: RePEc:pal:gpprii:v:47:y:2022:i:1:d:10.1057_s41288-021-00248-0
    DOI: 10.1057/s41288-021-00248-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41288-021-00248-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41288-021-00248-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andor, Mark A. & Osberghaus, Daniel & Simora, Michael, 2020. "Natural Disasters and Governmental Aid: Is there a Charity Hazard?," Ecological Economics, Elsevier, vol. 169(C).
    2. Butt, Adam & Donald, M. Scott & Foster, F. Douglas & Thorp, Susan & Warren, Geoffrey J., 2018. "One size fits all? Tailoring retirement plan defaults," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 546-566.
    3. Kunreuther, Howard & Novemsky, Nathan & Kahneman, Daniel, 2001. "Making Low Probabilities Useful," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 103-120, September.
    4. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2022. "Trust and Insurance Contracts," The Review of Financial Studies, Society for Financial Studies, vol. 35(12), pages 5287-5333.
    5. Mark Browne & Christian Knoller & Andreas Richter, 2015. "Behavioral bias and the demand for bicycle and flood insurance," Journal of Risk and Uncertainty, Springer, vol. 50(2), pages 141-160, April.
    6. Glenn W. Harrison & Jia Min Ng, 2016. "Evaluating The Expected Welfare Gain From Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 91-120, January.
    7. He, Haoran & Martinsson, Peter & Sutter, Matthias, 2012. "Group decision making under risk: An experiment with student couples," Economics Letters, Elsevier, vol. 117(3), pages 691-693.
    8. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
    9. Martin Jones & Robert Sugden, 2001. "Positive confirmation bias in the acquisition of information," Theory and Decision, Springer, vol. 50(1), pages 59-99, February.
    10. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    11. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    12. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.
    13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    14. Howard Kunreuther, 2015. "The Role of Insurance in Reducing Losses from Extreme Events: The Need for Public–Private Partnerships†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(4), pages 741-762, October.
    15. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David B. Huffman & Uwe Sunde, 2017. "Global Evidence on Economic Preferences," NBER Working Papers 23943, National Bureau of Economic Research, Inc.
    16. W. J. Wouter Botzen & Jeroen C.J.M. van den Bergh, 2009. "Bounded Rationality, Climate Risks, and Insurance: Is There a Market for Natural Disasters?," Land Economics, University of Wisconsin Press, vol. 85(2), pages 265-278.
    17. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    18. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1082-1095, October.
    19. Botzen, W.J.W. & van den Bergh, J.C.J.M., 2012. "Risk attitudes to low-probability climate change risks: WTP for flood insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 151-166.
    20. Alec Brandon & John A. List & Robert D. Metcalfe & Michael K. Price & Florian Rundhammer, 2019. "Testing for crowd out in social nudges: Evidence from a natural field experiment in the market for electricity," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(12), pages 5293-5298, March.
    21. Cristina Bicchieri & Eugen Dimant, 2022. "Nudging with care: the risks and benefits of social information," Public Choice, Springer, vol. 191(3), pages 443-464, June.
    22. Michael Siegrist & George Cvetkovich, 2000. "Perception of Hazards: The Role of Social Trust and Knowledge," Risk Analysis, John Wiley & Sons, vol. 20(5), pages 713-720, October.
    23. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    24. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
    25. Howard Kunreuther & Mark Pauly, 2004. "Neglecting Disaster: Why Don't People Insure Against Large Losses?," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 5-21, January.
    26. Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
    27. Nathalie Etchart-Vincent, 2004. "Is Probability Weighting Sensitive to the Magnitude of Consequences? An Experimental Investigation on Losses," Journal of Risk and Uncertainty, Springer, vol. 28(3), pages 217-235, May.
    28. repec:cup:judgdm:v:13:y:2018:i:3:p:237-245 is not listed on IDEAS
    29. Joel L. Horowitz & N. E. Savin, 2001. "Binary Response Models: Logits, Probits and Semiparametrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 43-56, Fall.
    30. Potrafke, Niklas, 2019. "Risk aversion, patience and intelligence: Evidence based on macro data," Economics Letters, Elsevier, vol. 178(C), pages 116-120.
    31. Armin Falk & Anke Becker & Thomas Dohmen & Benjamin Enke & David Huffman & Uwe Sunde, 2018. "Global Evidence on Economic Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1645-1692.
    32. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    33. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    34. Hunt Allcott & Judd B. Kessler, 2019. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 236-276, January.
    35. Robinson, Peter John & Botzen, W. J. Wouter & Kunreuther, Howard & Chaudhry, Shereen J., 2021. "Default options and insurance demand," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 39-56.
    36. W. J. Wouter Botzen & Howard Kunreuther & Jeffrey Czajkowski & Hans de Moel, 2019. "Adoption of Individual Flood Damage Mitigation Measures in New York City: An Extension of Protection Motivation Theory," Risk Analysis, John Wiley & Sons, vol. 39(10), pages 2143-2159, October.
    37. Luigi Guiso, 2012. "Trust & Insurance Markets," EIEF Working Papers Series 1207, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2012.
    38. Carolyn Kousky & Erwann Michel-Kerjan, 2017. "Examining Flood Insurance Claims in the United States: Six Key Findings," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(3), pages 819-850, September.
    39. J. François Outreville, 2013. "The Relationship Between Insurance and Economic Development: 85 Empirical Papers for a Review of the Literature," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(1), pages 71-122, March.
    40. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    41. Nathalie Etchart-Vincent, 2009. "Probability weighting and the ‘level’ and ‘spacing’ of outcomes: An experimental study over losses," Journal of Risk and Uncertainty, Springer, vol. 39(1), pages 45-63, August.
    42. Luigi Guiso, 2012. "Trust and Insurance Markets," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 41(1-2), pages 1-26, February.
    43. Philip Bubeck & W. J. Wouter Botzen & Jonas Laudan & Jeroen C.J.H. Aerts & Annegret H. Thieken, 2018. "Insights into Flood‐Coping Appraisals of Protection Motivation Theory: Empirical Evidence from Germany and France," Risk Analysis, John Wiley & Sons, vol. 38(6), pages 1239-1257, June.
    44. Carolyn Kousky, 2018. "Financing Flood Losses: A Discussion of the National Flood Insurance Program," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 21(1), pages 11-32, March.
    45. J. François Outreville, 2015. "The Relationship Between Relative Risk Aversion And The Level Of Education: A Survey And Implications For The Demand For Life Insurance," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 97-111, February.
    46. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    47. Daniel R. Petrolia & Craig E. Landry & Keith H. Coble, 2013. "Risk Preferences, Risk Perceptions, and Flood Insurance," Land Economics, University of Wisconsin Press, vol. 89(2), pages 227-245.
    48. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
    49. Jachimowicz, Jon M. & Duncan, Shannon & Weber, Elke U. & Johnson, Eric J., 2019. "When and why defaults influence decisions: a meta-analysis of default effects," Behavioural Public Policy, Cambridge University Press, vol. 3(2), pages 159-186, November.
    50. Nicholas Barberis, 2013. "The Psychology of Tail Events: Progress and Challenges," American Economic Review, American Economic Association, vol. 103(3), pages 611-616, May.
    51. T. Ermolieva & T. Filatova & Y. Ermoliev & M. Obersteiner & K. M. de Bruijn & A. Jeuken, 2017. "Flood Catastrophe Model for Designing Optimal Flood Insurance Program: Estimating Location‐Specific Premiums in the Netherlands," Risk Analysis, John Wiley & Sons, vol. 37(1), pages 82-98, January.
    52. Caroline Katsman & A. Sterl & J. Beersma & H. Brink & J. Church & W. Hazeleger & R. Kopp & D. Kroon & J. Kwadijk & R. Lammersen & J. Lowe & M. Oppenheimer & H. Plag & J. Ridley & H. Storch & D. Vaugha, 2011. "Exploring high-end scenarios for local sea level rise to develop flood protection strategies for a low-lying delta—the Netherlands as an example," Climatic Change, Springer, vol. 109(3), pages 617-645, December.
    53. Bruno Frey & Stephan Meier, 2004. "In a field experiment," Natural Field Experiments 00243, The Field Experiments Website.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robinson, Peter John & Botzen, W. J. Wouter & Kunreuther, Howard & Chaudhry, Shereen J., 2021. "Default options and insurance demand," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 39-56.
    2. Peter John Robinson & W. J. Wouter Botzen, 2023. "Can we nudge insurance demand by bundling natural disaster risks with other risks?," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 7(2), pages 39-46, December.
    3. Peter John Robinson & W. J. Wouter Botzen & Fujin Zhou, 2021. "An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand," Journal of Risk and Uncertainty, Springer, vol. 63(3), pages 275-318, December.
    4. Mol, Jantsje M. & Botzen, W.J. Wouter & Blasch, Julia E., 2020. "Behavioral motivations for self-insurance under different disaster risk insurance schemes," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 967-991.
    5. Peter John Robinson & W. J. Wouter Botzen, 2019. "Determinants of Probability Neglect and Risk Attitudes for Disaster Risk: An Online Experimental Study of Flood Insurance Demand among Homeowners," Risk Analysis, John Wiley & Sons, vol. 39(11), pages 2514-2527, November.
    6. Riehm, Tobias & Fugger, Nicolas & Gillen, Philippe & Gretschko, Vitali & Werner, Peter, 2022. "Social norms, sanctions, and conditional entry in markets with externalities: Evidence from an artefactual field experiment," Journal of Public Economics, Elsevier, vol. 212(C).
    7. Brülisauer, Marcel & Goette, Lorenz & Jiang, Zhengyi & Schmitz, Jan & Schubert, Renate, 2020. "Appliance-specific feedback and social comparisons: Evidence from a field experiment on energy conservation," Energy Policy, Elsevier, vol. 145(C).
    8. Philipp Doerrenberg & Andreas Peichl, 2022. "Tax Morale and the Role of Social Norms and Reciprocity - Evidence from a Randomized Survey Experiment," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 78(1-2), pages 44-86.
    9. Frederiks, Elisha R. & Stenner, Karen & Hobman, Elizabeth V., 2015. "Household energy use: Applying behavioural economics to understand consumer decision-making and behaviour," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1385-1394.
    10. Beshears, John & Kosowsky, Harry, 2020. "Nudging: Progress to date and future directions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 161(S), pages 3-19.
    11. Bonan, Jacopo & Battiston, Pietro & Bleck, Jaimie & LeMay-Boucher, Philippe & Pareglio, Stefano & Sarr, Bassirou & Tavoni, Massimo, 2021. "Social interaction and technology adoption: Experimental evidence from improved cookstoves in Mali," World Development, Elsevier, vol. 144(C).
    12. Itzhak Rasooly & Roberto Rozzi, 2022. "Masks, Cameras, and Social Pressure," Working Papers hal-03892947, HAL.
    13. Leonardo Bursztyn & Florian Ederer & Bruno Ferman & Noam Yuchtman, 2012. "Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment," NBER Working Papers 18241, National Bureau of Economic Research, Inc.
    14. Ayal, Shahar & Celse, Jérémy & Hochman, Guy, 2021. "Crafting messages to fight dishonesty: A field investigation of the effects of social norms and watching eye cues on fare evasion," Organizational Behavior and Human Decision Processes, Elsevier, vol. 166(C), pages 9-19.
    15. Löschel, Andreas & Rodemeier, Matthias & Werthschulte, Madeline, 2023. "Can self-set goals encourage resource conservation? Field experimental evidence from a smartphone app," European Economic Review, Elsevier, vol. 160(C).
    16. Botzen, W.J. Wouter & de Boer, Joop & Terpstra, Teun, 2013. "Framing of risk and preferences for annual and multi-year flood insurance," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 357-375.
    17. Ketki Sheth & Greg C. Wright, 2020. "The usual suspects: do risk tolerance, altruism, and health predict the response to COVID-19?," Review of Economics of the Household, Springer, vol. 18(4), pages 1041-1052, December.
    18. Itzhak Rasooly & Roberto Rozzi, 2022. "Masks, Cameras, and Social Pressure," SciencePo Working papers hal-03892947, HAL.
    19. W. Botzen & J. Aerts & J. Bergh, 2013. "Individual preferences for reducing flood risk to near zero through elevation," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 18(2), pages 229-244, February.
    20. Botzen, W.J.W. & van den Bergh, J.C.J.M., 2012. "Risk attitudes to low-probability climate change risks: WTP for flood insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 151-166.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:47:y:2022:i:1:d:10.1057_s41288-021-00248-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.