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Worth of data and natural disaster insurance
Author(s) -
Attanasi E. D.,
Karlinger M. R.
Publication year - 1979
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/wr015i006p01763
Subject(s) - damages , natural disaster , actuarial science , flood myth , flood insurance , government (linguistics) , business , natural hazard , econometrics , economics , geography , meteorology , archaeology , linguistics , philosophy , political science , law
The Federal Government in the past has provided medical and economic aid to victims of earthquakes and floods. However, regulating the use of hazard‐prone areas would probably be more efficient. One way to implement such land use regulation is through the national flood and earthquake insurance program. Because insurance firms base their premium rates on available information, the benefits from additional data used to improve parameter estimates of the probability distribution (governing actual disaster events) can be computed by computing changes in the premiums as a function of additional data. An insurance firm is assumed to set rates so as to trade off penalties of overestimation and underestimation of expected damages. A Bayesian preposterior analysis is applied to determine the worth of additional data, as measured by changes in consumers’ surplus, by examining the effects of changes in premiums as a function of a longer hydrologic record.