The Demand for Flood Insurance: Empirical Evidence

28 Pages Posted: 28 Jul 1999

See all articles by Mark J. Browne

Mark J. Browne

St. John's University - Peter J. Tobin College of Business

Robert E. Hoyt

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Date Written: June 25, 1999

Abstract

Flood damages that occur worldwide remain largely uninsured losses despite the efforts of governmental programs that in many cases make insurance available at below fair market cost. The current study focuses on the financial experience of the United States' National Flood Insurance Program (NFIP) from 1983 through 1993 to examine the hypothetical determinants of the flood insurance purchasing decision. The empirical analysis supports the hypotheses that income and price are influential factors in one's decision to purchase flood insurance. Our empirical findings also suggest that disaster relief efforts crowd out the purchase of flood insurance. Expenditures on mitigation, federally sponsored loss reduction efforts, are found to be negatively associated with the purchase of flood insurance. Flood insurance purchases at the state level are found to be highly correlated with the level of flood losses in the state during the prior year.

JEL Classification: D10, H40, H42

Suggested Citation

Browne, Mark J. and Hoyt, Robert E., The Demand for Flood Insurance: Empirical Evidence (June 25, 1999). Available at SSRN: https://ssrn.com/abstract=169448 or http://dx.doi.org/10.2139/ssrn.169448

Mark J. Browne (Contact Author)

St. John's University - Peter J. Tobin College of Business ( email )

New York, NY
United States

Robert E. Hoyt

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Athens, GA 30602-6255
United States
706-542-4290 (Phone)
706-542-4295 (Fax)

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