Risk Communication for Disaster Preparedness

For the millions of Americans exposed to flood, wildfire, or other natural disaster risks, accurately understanding the risk they face is critical to ensuring they are prepared for disasters when they occur and able to recover afterwards. Risk communication supports that goal by providing people with information about specific risks they face, in a way they can understand, as well by communicating the benefits and costs of different risk mitigation and insurance choices.

People’s intuitive impressions of uncertainty are affected by cognitive biases and shaped by simplifying heuristics that sometimes yield biased perceptions, particularly for rare events. For natural disasters, where the likelihood the event occurs is typically low, but the damage can be catastrophic, biased perceptions may cause costly mistakes. Researchers at the Risk Center study how disaster risk communications can address these biases and help people navigate consequential risk management decisions.

Broad bracketing for risk communication of low probability events

Project Overview

Shereen J. Chaudhry, Michael Hand, and Howard Kunreuther

Individuals tend to underprepare for rare, catastrophic events because of biases in risk perception. A simple form of broad bracketing—presenting the cumulative probability of loss over a longer time horizon—has the potential to alleviate these barriers to risk perception and increase protective actions such as purchasing flood insurance. However, it is an open question whether broad bracketing effects last over time: There is evidence that descriptive probability information is ignored when decisions are made from “experience” (repeatedly and in the face of feedback), which describes many protective decisions. Across six incentive-compatible experiments with high stakes, we find that the broad bracketing effect does not disappear or change size when decisions are made from experience. We also advance our understanding of the mechanisms underlying broad bracketing, finding that, while cumulative probability size is a strong driver of the effect, this is dampened for larger brackets which lead people to be less sensitive to probability size.

Using Risk Communication to Address Biased Flood Risk Perceptions

Philip Mulder, Lynn Conell-Price, and Howard Kunreuther 

Risk center researchers are investigating whether biased perceptions of flood likelihood and the financial cost of flooding contribute to low flood insurance coverage among homeowners and how targeted risk communication can address these biases. This project involves a field study with Florida homeowners comparing the impact of different information-based interventions on flood risk perceptions and protective behaviors to mitigate financial risk from flooding. Tested risk communications will vary both in the types of information they provide (e.g. property-specific flood probability estimates, cost of recent flood damage to other homes) and in how this information is framed (e.g. annual probability, 10-year probability). In addition to providing causal evidence on the impact of different information frictions on insurance decisions, this research will also provide practical lessons on designing flood risk communication.

Publications

Chaudhry, S., Hand, M. and Kunreuther, Howard C. (2020), Broad Bracketing for Low Probability Events. Wharton Risk Center working paper.

Kousky, C. (2018). How America Fails at Communicating Flood Risks. City Lab. October 11.

Kunreuther, H., and Pauly, M. (2018). Behavioral Economics of Multiperiod Insurance Purchasing Behavior: The Role of Emotions. Foundations and Trends® in Microeconomics, 12(2), 109-199.

Ripberger, J. T., Jenkins‐Smith, H. C., Silva, C. L., Czajkowski, J., Kunreuther, H., & Simmons, K. M. (2018). Tornado damage mitigation: homeowner support for enhanced building codes in Oklahoma. Risk Analysis, 38(11), 2300-2317.

Meyer, R., and Howard Kunreuther, H. (2017). The Ostrich Paradox: Why We Underprepare for Disasters. Wharton Digital Press.