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Study identifies room for improvement in natural disaster risk reduction activities

A new International Institute for Applied Systems Analysis (IIASA) study across Austria, England, and Romania finds room for improvement in both public and private schemes that could help encourage risk reduction behaviours and reduce losses in future disasters.

"Currently neither insurance nor governments successfully encourage risk reduction. Increased and more targeted efforts particularly from local authorities will be important, and have the capacity to change the picture. This will be exceedingly important considering extreme events from climate change," says IIASA researcher Susanne Hanger, who led the study. "This in turn is important for insurance to remain viable and for governments to not overspend on disaster aid."

The study, published in the journal Risk Analysis, provides a detailed look at different public and private incentives for risk reduction and their association with actual risk reduction behaviour, in the three European countries.

The study also finds little support for the idea that compensation for flood damage make people less likely to take personal risk reduction measures, such as taking actions to prepare for an eventual flood or installing structures or technologies that can help protect homes from damage. Instead, the study finds that neither private insurance nor public compensation after a disaster is linked to less risk reduction at an individual level.

"There is an idea that public compensation schemes are bad for risk reduction behaviour--that is, that if people know they will be compensated in the event of a disaster, they will be less likely to take measures that could help protect their property from damage," says Hanger. The new study does not disprove this idea, a tenet of economic theory, but it suggests that if the link does exist, it may not make a difference in overall behaviour, which is driven by many different factors. Unfortunately, the study suggests that insurers and public authorities may be the least of these factors.

Across all three countries, the researchers find room for improvement in both public and private schemes that could help encourage risk reduction behaviours and reduce losses in future disasters. Instead of increasing efforts to privatize all flood risk insurance, Hanger says, "We need to better coordinate public and private schemes in order to design not only efficient, but also socially just and politically feasible solutions."

The study is referenced as follows:

Hanger-Kopp S, Bayer J, Surminski S, Nenciu C, Lorant A, Ionescu R, & Patt A (2017). Insurance, public assistance and household flood risk reduction: A comparative study of Austria, England and RomaniaRisk Analysis 

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