Is there a trade-off between households’ precautions, mitigations and public protection for flood risk?

This paper evaluates willingness-to-pay (WTP) for flood insurance and floodgate installation in Tainan, Taiwan, and finds that household flood precaution (observing the water level) has a minor effect in terms of increasing the WTP for flood insurance, rather than decreasing it. The reason for this is that people who have public flood protection nearby do not lower their WTP for floodgate and insurance, and those who live near the water source of floods and exhibit precautionary behavior have higher risk perceptions and intend to pay more. The adopted mitigation (having sandbags or other barriers) will not affect the intention to further mitigate or buy insurance. This also means that adverse selection in relation to flood insurance is not serious in the flood-prone area of Tainan. Households may be aware of the limitation of public flood protection though the precautionary behavior, and found that flood insurance can compensate for most of the flood damage.