Resilience toward Volcanic Eruptions: Risk Perception and Disaster Microinsurance in Yogyakarta, Indonesia

Abstract

Disaster microinsurance has been argued to enhance people’s resilience toward natural hazards. In developing countries, however, the uptake of this insurance scheme has been limited. This paper investigates the influence of the perception of disaster risks on the probability of local people participating in a hypothetical disaster microinsurance scheme. We use household data to assess a specific disaster risk, notably the risk of an eruption of the Mount Merapi in Yogyakarta. We find that this perception positively influences the interest to participate in disaster microinsurance. We also find that insurance literacy has a strong positive relationship with the respondent’s interest to participate in disaster microinsurance.