PT  - JOURNAL ARTICLE
AU  - Hudson, Paul
AU  - Wouter Botzen, W. J.
AU  - Czajkowski, Jeffrey
AU  - Kreibich, Heidi
TI  - Moral Hazard in Natural Disaster Insurance Markets: Empirical Evidence from Germany and the United States
AID  - 10.3368/le.93.2.179
DP  - 2017 May 01
TA  - Land Economics
PG  - 179--208
VI  - 93
IP  - 2
4099  - http://le.uwpress.org/content/93/2/179.short
4100  - http://le.uwpress.org/content/93/2/179.full
SO  - Land Econ2017 May 01; 93
AB  - Moral hazard in natural disaster insurance markets results in policyholders preparing less, increasing the risk they face. However, moral hazard may not arise, due to high risk aversion or market context. We study the relationship between disaster risk reduction and insurance coverage to assess the presence of moral hazard for two different natural hazards, using four econometric models on survey data from Germany and the United States. 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. (JEL Q54)