Document Type

Working Paper

Publication Date

5-2026

Keywords

Flood risk perceptions; Belief updating; Natural disaster information; Flood insurance demand; Conservatism bias

Abstract

Prior research has documented a tendency for insurance demand to rise abruptly in the aftermath of natural disasters. This may be attributable in part to the information shock that a disaster represents. Understanding how beliefs about risk evolve is of first-order importance for projecting climate adaptation in coming decades. Using a three-wave survey of 815 residents of flood-prone coastal counties in the southeastern United States, including 436 for whom we have longitudinal data, we study how individuals’ beliefs evolve after two very different types of informational shocks about future local flooding risk: viewing flood maps, and experiencing a local flooding disaster. We find that, on average, exposure to maps causes respondents to update their beliefs of their homes’ ten-year flood risk downward substantially (38%, 95% CI 13%–56%) and reduces their reported level of worry on a ten-point scale. We then leverage the natural experiment created by differential flood exposure during the hurricane seasons of 2017 and 2018, the latter of which fell between the initial wave of our survey and two follow-up waves. We find that flood disasters systematically increase flood concern in affected counties, as expected. More surprisingly, we find that those who experienced a flood before Wave 1 saw greater increases in concern between waves than those who did not — a pattern inconsistent with standard Bayesian updating and more consistent with the conservatism hypothesis, whereby experiential information shocks are incorporated into beliefs only gradually. This delayed updating process has implications for projections of climate adaptation among flood-prone populations.

Comments

JEL Classification Numbers: D83, G52, Q54

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