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Insurance decision against forest fire : An econometric analysis combining experimental and real data

Author

Listed:
  • Marielle Brunette

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Couture

    (MIAT INRA - Unité de Mathématiques et Informatique Appliquées de Toulouse - INRA - Institut National de la Recherche Agronomique)

  • Jérôme Foncel

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Serge S. Garcia

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract
Storm and fire are responsible for 70% of total forestry damage due to natural hazards in Europe. They are associated to high costs for forest owners. However, very heterogeneous behaviors in terms of forest insurance demand arise across Europe. For example, only 6% of the French private forest area is insured against fire and/or storms. In this paper, we focus on the private forest owners' insurance decision against fire risk. For that purpose, we collect hypothetical data on willingness-to-pay (WTP hereafter) for insurance through a field experiment in which we test different scenarios of private insurance and public assistance. We also deal with real data about forest owners' insurance decision, characteristics of forests and owners. We simultaneously estimate real insurance coverage and willingness-to-pay for different insurance scenarios, using a selection equation for zero WTP values that we potentially explain by the phenomenon of protest responses against insurance in the expected utility framework. We find that real insurance provision is relevant to explain positive WTP, and we show that unobservable determinant of insurance coverage may explain protest responses. These results confirm the advantage of including observed choices in experiments on insurance demand.

Suggested Citation

  • Marielle Brunette & Stéphane Couture & Jérôme Foncel & Serge S. Garcia, 2017. "Insurance decision against forest fire : An econometric analysis combining experimental and real data," Post-Print hal-02785187, HAL.
    • Handle: RePEc:hal:journl:hal-02785187
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02785187
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    References listed on IDEAS

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