Demand for index-based flood insurance in Jakarta, Indonesia
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PhD Seminar (Econ)
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Developing country megacities are constantly exposed to flood risk, with a clear gap regarding insurance protection, and poor risk management by urban populations. This article analyses demand for hypothetical index-based flood insurance in Jakarta, Indonesia. A standard expected utility theory framework tests household’s reaction to distance (proxy for basis risk), its level of effect to reduce demand, and insurance uptake effects from price discounts, flood prevention, and risk aversion. As predicted, demand falls with price and basis risk, and households with better flood responses help increase demand. We recommend further investment in floodgate stations, expanded warning systems, and educational campaigns.
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Updated: 19 October 2024/Responsible Officer: Crawford Engagement/Page Contact: CAP Web Team