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The Ostrich Paradox Behavioral Risk Audit Matrix

by Robert Meyer and Howard Kunreuther


Impact on Beliefs



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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