Risk perceptions and economic incentives for mitigating windstorm damage to housing

ABSTRACT Mitigation measures such as window shutters can substantially reduce windstorm damage to housing. However, the cost-effectiveness of wind mitigation measures remains unclear when considering influencing factors such as financial protection via insurance, individual risk perceptions and planning time horizons. Economic incentives may also be provided to motivate homeowners to invest in mitigation. In this study, the installation of cyclone-rated window shutters as a mitigation measure for homeowners in Australia is used as a case study. A life-cycle cost analysis in conjunction with a rank-dependent expected utility model are employed to identify economic incentives that are financially attractive to homeowners with different perceived risks and planning time horizons. The effect of home insurance is also taken into account. The results suggest that, as expected, the economic incentives needed to promote window shutters among homeowners decrease with the perceived storm damage risk and planning time horizon. A rebate for shutter installation cost or a discounted insurance premium have been found to be feasible economic incentives considering a typical planning time horizon of ten years. Statistical surveys are needed in future work to calibrate the parameters within the rank-dependent utility model to better represent the risk perceptions of different groups of homeowners.