How does catastrophe-risk awareness affect purchase decisions and selection patterns in the insurance market? I study this issue using data on take-up rates of earthquake insurance among homeowners in California, where a semi-public insurer coexists with private insurers. The public insurance policy charges cross-subsidized premiums and is offered through specific homeowners insurance agents. I find that for those offered the public earthquake policy, a positive demand-risk correlation exists within the insurer’s pricing territory, suggesting that people have some meaningful awareness of their risk and act on it in ways consistent with adverse selection. However, despite private insurers having the opportunity to select the lower risks by pricing at a finer level, the positive demand-risk correlation persists for them. I interpret this as a result of market friction that limits homeowners’ ability to comparison shop, and their relative insensitivity to price as compared to risk.

中文翻译：

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巨灾保险中的风险意识和逆向选择：来自加利福尼亚住宅地震保险市场的证据

巨灾风险意识如何影响保险市场的购买决策和选择模式？我使用加利福尼亚的房主之间地震保险购买率的数据研究了这个问题，在加利福尼亚，一个半公共保险公司与私人保险公司共存。公共保险单收取交叉补贴的保费，并通过特定的房主保险代理人提供。我发现，对于那些提供了公共地震保单的人，保险公司的定价范围内存在着正的需求风险相关性，这表明人们对风险有一定的认识，并以与逆向选择相一致的方式采取行动。但是，尽管私人保险公司有机会通过以较高的价格定价来选择较低的风险，但它们之间仍存在正的需求风险相关性。