Natural hazard insurance demand: A systematic review

Area of Science:

• Environmental Science
• Risk Management
• Behavioral Economics

Background:

• Natural hazards incur significant costs, including property loss, fatalities, crop damage, and medical expenses.
• Insurance adoption can mitigate these costs, but demand for natural hazard insurance, particularly in South Africa, remains uncertain despite increasing hazard frequency and severity.

Purpose of the Study:

• To systematically review existing literature on the demand for natural hazard insurance.
• To identify key themes influencing demand, including psychological factors, risk perception, risk preference, and willingness to pay.

Main Methods:

• Adherence to Preferred Reporting Items for Systematic Review and Meta-analysis Protocols (PRISMA-P) guidelines.
• Systematic search yielding 645 articles, with 39 selected for in-depth review.

Main Results:

• A significant gap exists in demand for tailor-made natural hazard insurance products.
• Psychological factors, encompassing normative and descriptive decision-making, significantly influence insurance demand.
• Risk perception and preference are affected by community experience, age, and hazard salience.
• Willingness to pay is influenced by both monetary and non-monetary factors.

Conclusions:

• Low demand for natural hazard insurance is linked to psychological decision-making processes.
• There is a critical need for more research on risk preference and perception concerning natural hazards in Africa and the Southern African Development Community (SADC) region.