Homeowners Insurance with Bundled Catastrophe Coverage

29 Pages Posted: 24 Sep 2004

See all articles by Martin F. Grace

Martin F. Grace

Temple University - Risk Management & Insurance & Actuarial Science

Robert W. Klein

Georgia State University

Paul R. Kleindorfer

University of Pennsylvania - Operations & Information Management Department; Paul Dubrule Professor of Sustainable Development & Distinguished Research Professor at INSEAD

Abstract

We estimate the demand for homeowners insurance in Florida and New York with indicated loss costs as our proxy for the quantity of real insurance services demanded. We decompose the demand into the demand for coverage of catastrophe perils and the demand for noncatastrophe coverage and estimate these demand functions separately. Our results are relatively consistent in New York and Florida, including evidence that catastrophe demand is more price elastic than noncatastrophe demand. We also find evidence that consumers value options that expand coverage, buy more insurance when it is subsidized through regulatory price constraints, and consider state guaranty fund provisions when purchasing insurance.

Suggested Citation

Grace, Martin F. and Klein, Robert Warren and Kleindorfer, Paul R., Homeowners Insurance with Bundled Catastrophe Coverage. Journal of Risk and Insurance, Vol. 71, No. 3, pp. 351-379, September 2004. Available at SSRN: https://ssrn.com/abstract=591539

Martin F. Grace (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Robert Warren Klein

Georgia State University ( email )

5387 Northchester Ct
Atlanta, GA GA 30338
United States
404-386-1591 (Phone)

Paul R. Kleindorfer

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

Paul Dubrule Professor of Sustainable Development & Distinguished Research Professor at INSEAD

Boulevard de Constance
77305 Fontainebleau Cedex
France

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