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Abstract
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Traditional insurance principles for insurability require that there is sufficient demand to yield appropriate levels of income revenue for insurers to supply the coverage. In this study, for provision the earthquake insurance coverage we investigated the number of factors influencing on purchase rate of earthquake insurance in metropolitan Tehran ,Iran. We investigated whether individuals’ expected utility in the state of insurance is more than the expected utility in the state of no insurance. We also, empirically, investigated the influence of individuals’ characteristics such as the age of household head, education, employment, monthly income, distrust to insurance company, and so on, construction characteristics (type of structure, its age, construction quality and construction value), government interference and geophysical risk on demand to purchase earthquake insurance based on econometric model using questionnaire. The main results of this study are summarized follows: First, the expected utility in the state of insurance is more than the expected utility in the state of no insurance and the expected utility for individuals’ willingness to pay is more than the expected utility with real premium. Second, the level of geophysical risk is not related to the purchase of earthquake insurance. Third, the premium rate and structure value have significant negative relationship with demand for residential earthquake insurance. Fourth, Perception of risk has significant positive relationship with demand for residential earthquake insurance. Fifth, individuals’ trust to government interference for loss financing negatively affects the purchase of earthquake insurance. Sixth, income level have not significant relationship with insurance demand. Finally, the results show that individuals’ risk aversion is significantly related to demand for residential earthquake insurance.
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