by Robert Meyer and Howard Kunreuther
Bias | Impact on Beliefs | Manifestation | Remedy |
Myopia: a tendency to plan over short future horizons | Focus on short-term horizons in evaluating flood loss mitigation options | Failure to invest in cost-effective measures due to high up front costs | Couple long-term loans with insurance premium reductions to spread the up front cost over time |
Amnesia: a tendency to base decisions on recent experiences | Fading memory of past floods and resulting damage | Failure to renew annual flood insurance policy | Automatically renew multiyear policies with constant annual premiums |
Optimism: a tendency to underestimate the likelihood of personal harm | Underestimation of the probability of a flood | Tendency to see flood insurance and mitigation as overly expensive relative to benefits | Stretch time horizon so individual perceives the probability of a disaster to be closer to the scientific estimate |
Inertia: a tendency to choose the status quo | A preference for the status quo in protective investments; for floods, doing nothing | Reluctance to purchase insurance or invest in loss-reduction measures (e.g., storm shutter); procrastination in decision making | Make protection the default: make insurance a condition for obtaining a mortgage, or part of a bundled policy the resident can opt out of |
Simplification: a tendency to pay attention to only a few relevant factors | Limited consideration of information available about flood risk | Ignorance of the flood risk of a location; lack of knowledge of possible remedies | Implement communication programs that make it easier for residents to understand their flood risk, providing examples of the consequences of a flood |
Herding: a tendency to make decisions by basing choices on the observed actions of others | Tendency to base insurance decision on whether friends and neighbors have flood policies | Low rates of take-up at the community level | Implement communication programs that emphasize social norms of safety; offer seals of approval that enhance the social status of protective investments |
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