Characteristics and Protective Behaviors of Hazard Insurance Purchasers
We studied the relationship between disaster risk reduction and insurance coverage to assess the presence of moral hazard for two different natural hazards with survey data from Germany and the United States. Our statistical and methodological approach was guided by the approaches taken in previous studies investigating moral hazard in insurance markets. We applied multiple statistical methods across varied market constructs to investigate different aspects of moral hazard and to act as a robustness check. The results show that moral hazard is absent. Nevertheless, adverse risk selection may be present. This has significant policy relevance such as opportunities for strengthening the link between insurance and risk reduction measures.
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