Wildfire Insurance, Information, and Self-Protection
AbstractLike other climate-related disasters, wildfires are intensifying. Property owners can reduce their vulnerability to wildfire losses but are not well informed about the costs and benefits of available self-protection investments. Technological advances mean that insurers are increasingly able to monitor household mitigation behavior. We revisit the problem of self-protection from risk in a setting where households have incomplete insurance and limited information about self-protection investments. Insurer discounts for self-protection generate additional value by informing households about self-protection investments that also reduce uninsured losses. This information provision increases the responsiveness of self-protection to ex post disaster assistance, with implications for optimal government transfers.
CitationBoomhower, Judson, Meredith Fowlie, and Andrew J. Plantinga. 2023. "Wildfire Insurance, Information, and Self-Protection." AEA Papers and Proceedings, 113: 310-15. DOI: 10.1257/pandp.20231104
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G22 Insurance; Insurance Companies; Actuarial Studies
- G28 Financial Institutions and Services: Government Policy and Regulation
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q57 Ecological Economics: Ecosystem Services; Biodiversity Conservation; Bioeconomics; Industrial Ecology