Living with the Merapi volcano: risks and disaster microinsurance

Abstract

This paper investigates the influence of perception of natural disaster risks on the probability of local people to participate in a hypothetical disaster microinsurance. We use household data for a specific disaster risk of the Mount Merapi in Java. We find that respondent's perception of natural disaster risk is in line with experts' risk assessment. Estimation results show that this perception positively influences the interest to participate in disaster microinsurance. We also find that insurance literacy has a strong positive relationship with the respondent's interest to participate in disaster microinsurance. Show more