The impact of environmental risk information on beliefs and home insurance decisions

Catastrophic events, which are becoming increasingly frequent due to climate change, have significant negative impacts on housing. Yet, decision-makers remain puzzled by the low uptake rates for insurance coverage against these events. In this paper, we investigate whether this phenomenon is driven by individuals having miscalibrated beliefs about the likelihood of such events occurring. Additionally, we examine the impact of an information treatment designed to correct these perceived probabilities. Our experimental results show that participants in the treatment respond as expected, adjusting their beliefs accordingly. Moreover, these belief shifts influence participants’ demand for information on the topic and their interest in purchasing insurance. However, a follow-up survey conducted two months after the main experiment reveals that the effects of the treatment are short-lived, dissipating entirely within this period. Moreover, the information treatment shifts estimates about past mortality due to circulatory diseases, which are not closely related to the content of the information treatment, although more modestly. These two insights suggest ways of improving survey design in the field of information provision experiments. Our overall findings provide important insights for policymakers, highlighting the transient nature of the treatment-induced effects.