Doctoral Dissertation Research: Sharing the risk. Mitigation efforts and fairness ideals in climate insurance choices

Arizona State University, Scottsdale AZ

Investigators

Abstract

The increasing frequency and intensity of extreme weather events, such as floods and wildfires, are challenging the ability of communities and individuals to recover from adverse events. Insurance is one of the means to minimize the impact of climate change. Insurance policies, however are becoming less accessible in high-risk areas, impacting households’ ability to deal with losses related to natural hazards. This raises questions on how to manage risk, who should bear the cost of increasing climate-related damages, and what solutions can be adopted to reduce vulnerability to extreme weather events. This project investigates these aspects, by exploring motivations behind risk-sharing (i.e. the willingness of individuals to pool together risk to avoid financial losses) and the relationship between risk-sharing decisions and risk-reduction investments. The research insights can inform the development of climate insurance rules and support vulnerable communities exposed to risk. This project focuses on individuals’ decision-making processes, looking at the interplay between social preferences, risk reduction and collective action. Through pre-registered online behavioral experiments with a nationally representative sample, the project investigates risk-sharing decisions, their determinants, and the impact of risk-sharing choices on risk-reduction investments. First, the project identifies the impact of perceptions of fairness and unequal opportunities on risk-sharing decisions. Second, it explores the relationship between insurance choices and risk reduction measures, examining individual and collective forms of risk reduction (i.e. mitigation). This project extends advancements made in the field of social preferences to risk-sharing contexts, providing additional evidence about the motivation of risk-sharing, and provides causal evidence on the relationship between insurance choices and risk-reduction investments. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.