Jump to ContentJump to Main Navigation
Comparative Decision Making$
Users without a subscription are not able to see the full content.

Thomas R. Zentall and Philip H. Crowley

Print publication date: 2013

Print ISBN-13: 9780199856800

Published to Oxford Scholarship Online: May 2013

DOI: 10.1093/acprof:oso/9780199856800.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 19 October 2019

Improving Public Policy Decisions in Creating Institutions and Markets to Transfer Natural Disaster Risk in Developing Countries

Improving Public Policy Decisions in Creating Institutions and Markets to Transfer Natural Disaster Risk in Developing Countries

Chapter:
(p.465) Chapter 15 Improving Public Policy Decisions in Creating Institutions and Markets to Transfer Natural Disaster Risk in Developing Countries
Source:
Comparative Decision Making
Author(s):

Jerry R. Skees

Grant Cavanaugh

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199856800.003.0045

This chapter considers patterns in individual and collective decision making that lead to a prevailing under-preparedness for natural catastrophes. They focus on a particular risk-management tool—index insurance. At the heart of suboptimal decision-making is the tendency of insurance buyers to underestimate the risk posed by low-probability, high-consequence events, while insurance providers tend to overestimate risk to avoid having inadequate funds when a natural catastrophe occurs. The result is that insurance may be overpriced relative to demand, and the population is underprotected. Index insurance uses the probability of a damaging event’s occurrence as the basis for payment, rather than an assessment of individual losses. Natural disaster risk is problematic for insurers because of geographic correlations. This requires transferring the highest risks to global markets or when feasible to government, whereas more moderate risk and less geographically widespread risk can be borne by traditional insurance market, and small losses can be absorbed as deductibles by insurance buyers.

Keywords:   individual decision making, collective decision making, natural catastrophes, index insurance, insurance buyers, insurance providers, overpricing, underprotection, geographic correlations

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .