Determinants of Participation in a Catastrophe Insurance Programme: Empirical Evidence from a Developing Country

The paper presents empirical evidence of the determinants of catastrophe insurance participation in one of the poorest and most disaster prone countries in the world. In a large-scale household survey carried out in 2006 we ask 3,000 residents in six different districts in Bangladesh facing various environmental risk exposure levels about their willingness to participate in a catastrophe insurance programme. Combining factors put forward in risk theory and economics, we estimate a model of insurance participation. We show that the household decision to participate in the insurance programme differs depending on both exogenous and endogenous risk exposure levels. As predicted by micro-economic theory, ability to pay, measured in terms of household income and access to credit, significantly affects insurance participation. Furthermore, among the sociodemographic factors investigated in this case study, respondent education and occupation are found to significantly influence household decision making. Our study suggests that low participation rates for catastrophe insurance in a developing country can be explained by high rates of illiteracy and limited access to credit.


Issue Date:
2008
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/5984
Total Pages:
37
JEL Codes:
Q54
Series Statement:
Conference Paper




 Record created 2017-04-01, last modified 2017-12-09

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