Fear or money? Decisions on insuring oneself against flood TOMASZ ZALESKIEWICZ Institue of Organization and Management, Wroclaw University of Technology, Smoluchowskiego 25, 50-372 Wroclaw, POLAND. E-mail: zaleskiewicz@ioz.pwr.wroc.pl ZBIGNIEW PISKORZ and ANNA BORKOWSKA Institute of Organization and Management, Wroclaw University of Technology Abstract In 1999 a research program was started with the goal of finding the main reasons that influence people’s decisions to insure themselves against losses caused by flood. In a field study a questionnaire that measured perception of the flood risk and motives for insuring or not insuring against the consequences of this disaster was used. The data were collected on a group of 66 households that were hit by flood in 1997. As expected, the results showed that the insurance decisions were related to a few basic psychological factors of flood-risk perception. The most important finding was that people who reported greater fear while thinking about flood bought insurance more often after the flood had occurred than people who did not report fear. Another factor of flood-risk perception, knowledge about flood, was not related to any aspect of insurance decisions. The practical implications of these findings are discussed. 1. Introduction In 1997 people living in the southern regions of Poland experienced a terrible flood. Many citizens lost their houses or a substantial part of their property. Most of the victims expected the government to aid them financially. At the same time it came out that a majority of the people who suffered losses were not insured against the consequences of the flood. Other authors also discovered similar problems. Browne and Hoyt (2000) reported that a large portion of the property at risk from flooding in the USA and Germany remains uninsured, although in the former country the National Flood Insurance Program has been established, and in the latter two-thirds of private insurers offer the possibility of insuring against flood. Pynn and Ljung (1999) examined the reasons for homeowners’ insurance decisions before a flood disaster in Grand Forks, North Dakota, in April 1997. They found that, in spite of National Weather Service’s predictions that a record flood might be produced by snow melting and the Federal Emergency Management Agency’s advertisements in the media, only a minority of property owners in that area purchased an insurance policy against the danger of flooding. Slovic et al. (1977) and Kunreuther et al. (1978) studied why property owners at risk from flooding avoided insuring themselves against the consequences of such a Risk Decision and Policy (2002), vol. 7, pp. 221–233. Published by Cambridge University Press 221 # 2002 Risk Decision and Policy 10.1017/S1357530902000662