Context Comes to Mind: Evidence and Implications for Protection against Catastrophes

60 Pages Posted: 29 Mar 2022 Last revised: 29 Apr 2022

See all articles by Kazuhiko Kakamu

Kazuhiko Kakamu

Nagoya City University - Graduate School of Economics

Shinichi Kamiya

Nanyang Business School, Nanyang Technological University

Petra Staufer-Steinnocher

affiliation not provided to SSRN

Takashi Yamasaki

Kobe University - Graduate School of Business Administration

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce

Date Written: March 5, 2022

Abstract

We study how the urban context of a disaster affects protection decisions against catastrophes using the 1995 Kobe earthquake, which is highly relevant to urban life but difficult to link with rural life. We use a Bayesian approach to identify regions with major cities where the sensitivities of earthquake insurance take-up determinants shifted after the earthquake. We found that relevance to the urban context creates significant heterogeneity in post-quake protection decisions. Furthermore, the post-quake substitution between earthquake insurance and life insurance suggests that information content strongly influences perceived risk and protection decisions.

Keywords: catastrophe, earthquake, context, heuristic, insurance

JEL Classification: D12, D81, D83, G2

Suggested Citation

Kakamu, Kazuhiko and Kamiya, Shinichi and Staufer-Steinnocher, Petra and Yamasaki, Takashi and Yanase, Noriyoshi, Context Comes to Mind: Evidence and Implications for Protection against Catastrophes (March 5, 2022). Nanyang Business School Research Paper No. 22-12, Available at SSRN: https://ssrn.com/abstract=4050176 or http://dx.doi.org/10.2139/ssrn.4050176

Kazuhiko Kakamu

Nagoya City University - Graduate School of Economics ( email )

Japan

Shinichi Kamiya (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

Petra Staufer-Steinnocher

affiliation not provided to SSRN

Takashi Yamasaki

Kobe University - Graduate School of Business Administration ( email )

2-1 Rokkodai-cho
Nada-ku
Kobe, Hyogo 657-8501
Japan

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan
1088345 (Fax)

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