Should earthquake mitigation measures be voluntary or required?

ABSTRACT

This paper investigates the impact that volunatry or required insurance will have on the incentive to adopt loss mitigation measure. We show that several factors impact on the amount of mitigation that that an individual is likely to employ The amount of insurance coverage. Insurance reduces the difference between incomes in disaster and non-disaster states of the world. Hence, there is less incentive for individuala to adopt loss reduction measures if they are required to purchase insurance. The estimate of the risk. If individuals underestimate the probability of an earthquake they will very likely underinvest in mitigation. The relationship between premiums and investment in loss mitigation. Insurance may encourage mitigation by conveying information through premium reductions for investment in loss reduction (AU)