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Worth of data and natural disaster insurance

January 1, 1979

The Federal Government in the past has provided medical and economic aid to victims of earthquakes and floods. However, regulating the use of hazard-prone areas would probably be more efficient. One way to implement such land use regulation is through the national flood and earthquake insurance program. Because insurance firms base their premium rates on available information, the benefits from additional data used to improve parameter estimates of the probability distribution (governing actual disaster events) can be computed by computing changes in the premiums as a function of additional data. An insurance firm is assumed to set rates so as to trade off penalties of overestimation and underestimation of expected damages. A Bayesian preposterior analysis is applied to determine the worth of additional data, as measured by changes in consumers’ surplus, by examining the effects of changes in premiums as a function of a longer hydrologic record.

Citation Information

Publication Year 1979
Title Worth of data and natural disaster insurance
DOI 10.1029/WR015i006p01763
Authors E.D. Attanasi, M.R. Karlinger
Publication Type Article
Publication Subtype Journal Article
Series Title Water Resources Research
Index ID 70012527
Record Source USGS Publications Warehouse