Dispositional Factors Affecting Choices Surrounding the Purchase of Insurance and the Taking of Mitigating Measures Against Flooding

Abstract

This research investigated the role of dispositional factors in decisions to purchase insurance and to take mitigating measures against flooding. Two dispositional factors-risk aversion in the domain of losses and time discounting rate-were found to be predictors of the decision to acquire flood insurance. The observation of a relationship between experiment-based risk attitudes and the decision to insure oneself against flooding replicates a finding of Petrolia et al. The finding that impatience negatively impacts decisions to take out insurance against flooding is novel. However, support was not found for analogous hypotheses concerning relationships between the two dispositional variables and decisions to take mitigating measures. Evidently, factors other than individual risk aversion and time discounting rate play a crucial role in this behavior.

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