Building Community Resilience Using Gain-Loss Framing to Nudge Homeowner Mitigation and Insurance Decision-making

Abstract

Promoting homeowners’ preparation for natural disasters is a critical component of building community resilience. Adoption of protective actions by individual homeowners could reduce the risk of injury and damage to property; however, despite extensive public education programs, numerous studies report that households still are under-prepared for natural disasters. The effectiveness of gain-loss framing to nudge risk averse decision-making has been demonstrated across several domains, yet the application of gain-loss framing effects for natural disaster preparation has concentrated only on policy-level decisions. A behavioral experiment (N= 1,840) was conducted to test whether gain-loss framing can be used to nudge homeowner risk mitigation and insurance purchase decisions. Consistent with Prospect Theory, results indicate that a gain-frame is more likely to lead to risk averse decisions to mitigate for floods and hurricanes, but not for earthquakes. Disaster specific framing effects for nudging individual mitigation decisions provide unique implications building community resilience.