Catastrophes and the Demand for Life Insurance

40 Pages Posted: 29 Jan 2009 Last revised: 27 Jul 2010

See all articles by Stephen G. Fier

Stephen G. Fier

University of Mississippi - School of Business Administration

James M. Carson

University of Georgia

Date Written: July 23, 2010

Abstract

Prior research suggests that the occurrence of a catastrophe may lead to increases in risk mitigation, risk perception, and the demand for insurance. Given the extensive damage inflicted by major natural disasters, such a phenomenon is intuitive for property risk. However, the literature includes theory and evidence that suggest a broader behavioral perspective, and we therefore examine the possible link between catastrophes and subsequent demand for insurance against mortality risk. Based on U.S. state-level data for the period 1997 through 2008, we provide evidence of a significant positive relationship between catastrophes and life insurance demand. The finding holds both for states directly affected by the event and for neighboring states. In addition, evidence suggests that post-catastrophe life insurance demand is sensitive to the size of the catastrophe.

Keywords: Catastrophes, Natural Disasters, Insurance Demand, Life Insurance

JEL Classification: C23, D80, G22, Q54

Suggested Citation

Fier, Stephen G. and Carson, James M., Catastrophes and the Demand for Life Insurance (July 23, 2010). Available at SSRN: https://ssrn.com/abstract=1333755 or http://dx.doi.org/10.2139/ssrn.1333755

Stephen G. Fier (Contact Author)

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

James M. Carson

University of Georgia ( email )

Athens, GA 30602-6254
United States

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