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Determinants of Participation in a Catastrophe Insurance Programme: Empirical Evidence from a Developing Country

Author

Listed:
  • Akter, Sonia
  • Brouwer, Roy
  • Chowdhury, Saria
  • Aziz, Salina

Abstract

The paper presents empirical evidence of the determinants of catastrophe insurance participation in one of the poorest and most disaster prone countries in the world. In a large-scale household survey carried out in 2006 we ask 3,000 residents in six different districts in Bangladesh facing various environmental risk exposure levels about their willingness to participate in a catastrophe insurance programme. Combining factors put forward in risk theory and economics, we estimate a model of insurance participation. We show that the household decision to participate in the insurance programme differs depending on both exogenous and endogenous risk exposure levels. As predicted by micro-economic theory, ability to pay, measured in terms of household income and access to credit, significantly affects insurance participation. Furthermore, among the sociodemographic factors investigated in this case study, respondent education and occupation are found to significantly influence household decision making. Our study suggests that low participation rates for catastrophe insurance in a developing country can be explained by high rates of illiteracy and limited access to credit.

Suggested Citation

  • Akter, Sonia & Brouwer, Roy & Chowdhury, Saria & Aziz, Salina, 2008. "Determinants of Participation in a Catastrophe Insurance Programme: Empirical Evidence from a Developing Country," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5984, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare08:5984
    DOI: 10.22004/ag.econ.5984
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    References listed on IDEAS

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    Cited by:

    1. Menna Hassan & Nourhan Sakr & Arthur Charpentier, 2022. "Government Intervention in Catastrophe Insurance Markets: A Reinforcement Learning Approach," Papers 2207.01010, arXiv.org.
    2. Awel Y. & Azomahou T.T., 2015. "Risk preference or financial literacy? Behavioural experiment on index insurance demand," MERIT Working Papers 2015-005, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Md. Monirul Islam & Shusuke Matsushita & Ryozo Noguchi & Tofael Ahamed, 2022. "A damage-based crop insurance system for flash flooding: a satellite remote sensing and econometric approach," Asia-Pacific Journal of Regional Science, Springer, vol. 6(1), pages 47-89, February.
    4. Mohammed Ahmar Uddin, 2017. "Microinsurance in India: Insurance literacy and demand," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(2), pages 182-191, May.
    5. Martin Eling & Shailee Pradhan & Joan T Schmit, 2014. "The Determinants of Microinsurance Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 224-263, April.
    6. Sonia Akter & Roy Brouwer & Saria Choudhury & Salina Aziz, 2009. "Is there a commercially viable market for crop insurance in rural Bangladesh?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 215-229, March.
    7. Aloysius G. Brata & Piet Rietveld & Henri L.F. de Groot & Budy P. Resosudarmo & Wouter Zant, 2014. "Living with the Merapi Volcano: Risks and Disaster Microinsurance," Departmental Working Papers 2014-13, The Australian National University, Arndt-Corden Department of Economics.
    8. Annette Hofmann & Peter Zweifel, 2024. "Can Investment Views Explain Why People Insure Their Cell Phones But Not Their Homes?—A New Perspective on the Catastrophe Insurance Puzzle," JRFM, MDPI, vol. 17(1), pages 1-12, January.
    9. Hott, Christian & Tran, Thi Xuyen, 2020. "NatCats and Insurance in a Developing Economy - New Theoretical and Empirical Evidence," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224551, Verein für Socialpolitik / German Economic Association.
    10. Uddin, Mohammed Ahmar, 2017. "Microinsurance in India: Insurance literacy and demand," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(2).
    11. Sodokin, Koffi & Djafon, Joseph Kokouvi & Dandonougbo, Yevessé & Akakpo, Afi & Couchoro, Mawuli K. & Agbodji, Akoété Ega, 2023. "Technological change, completeness of financing microstructures, and impact on well-being and income inequality," Telecommunications Policy, Elsevier, vol. 47(6).

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    Keywords

    Consumer/Household Economics; Environmental Economics and Policy; International Development; Risk and Uncertainty;
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