Abstract
Ever since the “Wenchuan earthquake” in May 12, 2008, there are some other earthquakes every year in China. China seems at the stage with active earthquakes. However, there is nothing the government can do to prevent such natural disasters. Instead the government can only try to issue alert information and to build an efficient afterward recovering system. Earthquake insurance could be an effective way to provide additional recovering money besides government funds. But the question is whether consumers are willing to buy and pay for earthquake insurance if government is not paying. Therefore, this chapter is to investigate Chinese residents’ preferences for earthquake insurance, especially to analyze their willingness to accept and willingness to pay for earthquake insurance. Previous studies have shown that risk perception, social trust, and consumers’ characteristics have significant impact on consumers’ earthquake insurance. Thus the measure of association was used to analyze Chinese consumers’ preferences, followed by a short case for “Pearl River Delta” region in China. The data was collected though an online survey in Shenzhen, a core city in “Pearl River Delta” region. A total of 637 surveys were returned, and of those collected, 428 are valid. The results indicate that consumers are willing to buy and pay for earthquake insurance for higher-risk regions. However, for the lower-risk regions, government has to put more effort on increasing social trust for consumers. In addition, insurance companies need to provide earthquake property insurance product and earthquake life insurance product separately and together too according to consumers’ different preferences.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
References
Adger WN (2003) Social capital, collective action, and adaptation to climate change. Econ Geogr 79(4):387–404
Browne MJ, Hoyt RE (2000) The demand for flood insurance: empirical evidence. J Risk Uncertain 20(3):291–306
Jametti M, von Ungern-Sternberg T (2010) Risk selection in natural-disaster insurance. J Inst Theor Econ 166(2):344–364
Lu J (2014). Washingtonpost. http://www.washingtonpost.com/news/business/wp/2014/08/26/fewer-americanhomeowners-are-buying-earthquake-insurance-and-the-risk-is-growing/. Retrieved 09 Oct 2014
Johnson EJ, Hershey J, Meszaros J, Kunreuther HC (1993) Framing, probability distortions, and insurance decisions. J Risk Uncertain 7:35–51
Kahneman D, Tversky A (1979) Prospect theory: an analysis of decision under risk. Econometrica: J Econom Soc 47(2):263–291
Kunreuther HC (1978) Disaster insurance protection: public policy lessons. Wiley, New York
Kunreuther H, Michel-Kerjan E (2009) At war with the weather: managing large-scale risks in a new era of catastrophes. MIT Press, Cambridge, MA
Kuran T (1995) Private truths, public lies: the social consequences of preference falsification. Harvard University Press, Cambridge, MA
Lanbo L (2001) Stable continental region earthquakes in South China. Pure Appl Geophys 158(2001):1583–1611
Lichtenstein S, Slovic P, Fischhoff B, Layman M, Combs B (1978) Judged frequency of lethal events. J Exp Psychol Hum Learn Mem 4(6):551–578
Nelson DR, Adger WN, Brown K (2007) Adaptation to environmental change: contributions of a framework. Annu Rev Environ Resour 32(1):395–419
Norgaard KM (2011) Living in Denial: climate change, emotions, and everyday life. MIT Press, Cambridge, MA
Ostrom E (2000) Collective action and the evolution of social norms. J Econ Perspect 14(1):137–158
Pelling M, High C (2005) Understanding adaptation: what can social capital offer assessments of adaptive capacity? Glob Environ Chang 15(4):308–319
Schoemaker PJ, Kunreuther H (1979) An experimental study of insurance decisions. J Risk Insur 46(4):603–618
Schwartz A, Hasnain M (2002) Risk perception and risk attitude in informed consent. Risk Decis Policy 7(2):121–130
Showers VE, Shotick JA (1994) The effects of household characteristics on demand for insurance: a Tobit analysis. J Risk Insur 61(3):492–502
Slovic P, Fischhoff B, Lichtenstein S, Corrigan B, Combs B (1977) Preference for insuring against probable small losses: insurance implications. J Risk Insur 44(2):237–258
Smith VL (1968) Optimal insurance coverage. J Polit Econ 76(1):68–77
Swim J, Clayton S, Doherty T, Gifford R, Howard G, Reser J, Stern P, Weber E (2009) Psychology and global climate change: addressing a multifaceted phenomenon and set of challenges. American Psychological Association, Washington, DC
Swiss Re (2014) Mind the risk: a global ranking of cities under threat from natural disasters. www.swissre.com by Swiss Reinsurance Company Ltd
Wang M, Liao C, Yang S, Zhao W, Liu M, Shi P (2012) Are people willing to buy natural disaster insurance in China? Risk awareness, insurance acceptance, and willingness to pay. Risk Anal 32(10):1717–1740
Wolf J, Adger WN, Lorenzoni I, Abrahamson V, Raine R (2010) Social capital, individual responses to heat waves and climate change adaptation: an empirical study of two UK cities. Glob Environ Chang 20(1):44–52
Wong KK, Zhao X (2001) Living with floods: victims’ perceptions in Beijing, Guangdong, China. Area 33(2):190–201
Ye T, Wang M (2013) Exploring risk attitude by a comparative experimental approach and its implication to disaster insurance practice in China. J Risk Res 16(7):861–878
Zeckhauser R (1996) The economics of catastrophes. J Risk Uncertain 12(2–3):113–140
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer Science+Business Media Singapore
About this chapter
Cite this chapter
Ge, J., Zhao, J., Nisar, S. (2016). New Consumers’ Perspective in Insuring Earthquakes. In: Foo, C. (eds) Diversity of Managerial Perspectives from Inside China. Managing the Asian Century. Springer, Singapore. https://doi.org/10.1007/978-981-287-555-6_7
Download citation
DOI: https://doi.org/10.1007/978-981-287-555-6_7
Publisher Name: Springer, Singapore
Print ISBN: 978-981-287-554-9
Online ISBN: 978-981-287-555-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)