I thought about this question when I saw a recent story in the Sacramento Bee about what a large percentage of the area households has not purchased flood insurance despite urgent flood warnings. I hesitate to link to this story, because the paper has a registration process that is free but foolish and annoying, but here is the link. Here is the lede of the story:
With the rainy season looming, and memories of local levee emergencies and Hurricane Katrina still fresh, flood awareness has never been higher in the Sacramento region.
Yet getting people to buy flood insurance remains a tough sell for local flood control officials.
In Natomas, a low-lying community with nearly 80,000 people, the number of homeowners with flood insurance policies is rising. Still, three-quarters of property owners in this vulnerable region do not carry flood insurance, according to the most recent statistics from FEMA, the Federal Emergency Management Agency.
People quoted in the story are at a loss to explain why their "outreach" on flood dangers isn’t working, why flood insurance is not widely purchased and, in certain areas with a high percentage of buildings insured for flood, why percentages are slipping.
Like you, I probably have some intuitive answers for this phenomenon, and the story contains some clues: it appears the warnings coming from authorities may be contradicted by other information about how the price of flood insurance will be dropping in the Sacramento area because the risk is declining. Also, people may pay more attention to the risk assessment of their neighbors than they do to that of the government, and they do what friends do.
This excellent research paper on the inefficacy of many flood warnings contains the above reasons and more (I am paraphrasing them):
some people are risk neutral or risk seeking rather than risk averse;
some people don’t like being told what to do and won’t follow orders unless compelled;
some people have other priorities, like getting their other affairs in order or making sure family members are safe;
some people let tomorrow worry about itself, and figure they will think about a loss if and when they suffer one;
In addition, the authors note that in many communities, the population is heterogeneous, and it may be difficult to get information to everyone in a way that they will understand it and believe it.
I don’t place great emphasis on this last reason, because in one of the most homogeneous populations I know — the residents of Grand Forks, North Dakota, a well-educated, middle-class university town — the same problems occurred with people refusing to get flood insurance and heed warnings despite widespread dissemination by formal and informal means that a humongous flood was coming up the Red River in the spring of 1997. As this piece from Minnesota Public Radio mentions, an extensive media campaign encouraged people to buy flood insurance:
As damage was assessed in the wake of the flood, the importance of the Federal Flood Insurance Program became clear, but troubling questions remain about why thousands of people did not have flood insurance.
Ad voice: A public safety message from FEMA…. Federal disaster assistance after a flood can help you get back on your feet, but it won’t take care of everything. That’s why you need flood insurance.
In early 1997, Radio and TV stations ran ads for weeks urging people to buy flood insurance.
Ad voice: Remember it’s not if it will flood, but when….
In Spring 1997, I was living in Michigan, and even I heard these warnings. True, I had more than the average Michigander’s interest. I spent a lot of time in Grand Forks when I was in college, one of my sisters was married there, and I always have been and remain a huge fan of the University of North Dakota Fighting Sioux hockey team, which has won more NCAA championships than any school except Michigan. Despite the warnings, only about 10 percent of those flooded out had purchased flood insurance.
The flood forced 90 percent of the town to flee and caused $1.5 billion in damage in a city of fewer than 50,000 people, as this 2001 retrospective from Prairie Public Radio says. My wife and I happened to be driving through Grand Forks a couple weeks after the flood subsided, and the destruction was shocking. There is something about seeing all a family’s possessions covered with mud and piled as rubble in the backyard under the merciless sky that sends a cold chill down your spine, and makes you ponder that no man knows the day or the hour when the Reaper will arrive.
So why did so few buy flood insurance? Some claim their insurance agents told them to save the $250 in premiums (you could purchase flood insurance up to 30 days before the flood happened). Here’s an account from a guy who didn’t listen to his agent, figuring he would blow the $250 on something else anyway. Others claim the weather forecasts were misleading (this was a popular place for politicians to point the finger), and there may be some truth in this: a huge and unexpected snowstorm in early April added to what was already a huge snowfall. Some apparently placed misguided faith in sandbag dikes, which were far too short for the flood that arrived. But, I suspect, two reasons were primary: first, most people had lived through prior flood warnings where flood damage had not affected them, and second, they still had lives to carry on and didn’t want to think about all the bad things that could happen. If you know of any other studies or articles on this phenomenon, drop me an e-mail or leave a comment below.