The Flood Insurance Market in Vietnam: Challenging but Potentially Profitable

By Phung Thanh Binh, Xueqin Zhu, Rolf Groeneveld, Ekko van Ierland
Summary: This research estimated farmers’ willingness to pay (WTP) for insurance against flood hazards using a choice experiment with special attention given to attribute non-attendance and the effects coding method. In addition, the research identified some challenges and opportunities to provide policymakers with new insights into the design of a flood insurance market. A random sample of 374 households in the Vietnam Mekong River Delta was collected in 2015. The results indicate that a large proportion of respondents do not favor a flood insurance scheme, possibly due to the existence of the cluster effect, loss aversion, wishful thinking (i.e., the belief that flooding will not happen again), and moral hazard. In particular, the younger generation of farmers is ignoring flood insurance. The opportunities for the development of the flood insurance market are promising for all potential providers because WTP is high enough to earn a profit.

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Country: Vietnam
Publication Year2017
Research AreasClimate Change
Research Topic: Mitigation
Analytical FrameworkBehavioral/ Experimental Economics