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The Demand for Homeowners Insurance
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@MISC{Catastrophe_thedemand,
author = {With Bundled Catastrophe and Martin F. Grace and Robert W. Klein and Paul R. Kleindorfer and James Ament and Georges Dionne and David Durban and Howard Kunreuther and Neil Doherty and Michael Murray and Steven Nivin},
title = {The Demand for Homeowners Insurance},
year = {}
}
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Abstract
This paper analyzes the demand for homeowners insurance in markets subject to catastrophe losses and where consumers have choices in configuring their coverage for catastrophe and non-catastrophe perils. We estimate the demand for homeowner insurance in Florida and New York using two-stage least squares regression with advisory indicated loss costs as our proxy for the quantity of real insurance services demanded. We decompose the demand for insurance into the demand for coverage of catastrophe perils (i.e., hurricanes or windstorms) and the demand for non-catastrophe coverage and estimate these demand functions separately. Our results are relatively consistent in New York and Florida, including evidence that catastrophe demand is more price elastic than noncatastrophe demand. We also find evidence that consumers value options that expand coverage, buy more insurance when it is subsidized through regulatory price constraints, and consider state guaranty fund provisions when purchasing insurance. The Demand for Catastrophe Insurance with Bundled Catastrophe Coverages I.
Keyphrases
homeowner insurance new york demand function catastrophe peril non-catastrophe peril regulatory price constraint advisory indicated loss cost catastrophe loss catastrophe demand consumer value option bundled catastrophe coverage state guaranty fund provision non-catastrophe coverage square regression catastrophe insurance noncatastrophe demand real insurance service
