Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76969 
Year of Publication: 
2001
Series/Report no.: 
Working Paper Series: Finance & Accounting No. 69
Publisher: 
Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften, Frankfurt a. M.
Abstract: 
In this paper, we estimate the demand for homeowner insurance in Florida. Since we are interested in a number of factors influencing demand, we approach the problem from two directions. We first estimate two hedonic equations representing the premium per contract and the price mark-up. We analyze how the contracts are bundled and how contract provisions, insurer characteristics and insured risk characteristics and demographics influence the premium per contract and the price mark-up. Second, we estimate the demand for homeowners insurance using two-stage least squares regression. We employ ISO's indicated loss costs as our proxy for real insurance services demanded. We assume that the demand for coverage is essentially a joint demand and thus we can estimate the demand for catastrophe coverage separately from the demand for noncatastrophe coverage. We determine that price elasticities are less elastic for catastrophic coverage than for non-catastrophic coverage. Further estimated income elasticities suggest that homeowners insurance is an inferior good. Finally, we conclude based on the results of a selection model that our sample of ISO reporting companies well represents the demand for insurance in the Florida market as a whole.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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