This article highlights Don Browns most recent contribution, titled: “Behavioral Economics and Coastal Insurance Markets.” His newest white paper exploits our past to help us Floridians improve our future–a future that will always threaten the balance between weather and humankind. Like no other venue, Florida is a petri dish for managing life in paradise.
Don Brown fittingly demonstrates that Florida’s insurance market has functioned as a natural laboratory since Hurricane Andrew struck in 1992. Over the course of three decades, the state has endured repeated crises followed by a wide range of regulatory responses–capturing the interplay between consumer psychology, policy interventions and market dynamics.
Browns’ white paper is the foundation for his upcoming book applying behavioral economics to coastal property insurance markets. He draws from thirty plus years of empirical data to show that cognitive and emotional biases—not just actuarial risk—influence consumer decisions, legislative enactments and insurance market stability.
The white paper (and book) urges policymakers to align regulatory strategies with real-world behavioral patterns rather than idealized economic models. It provides actionable recommendations for legislators, regulators, insurers and consumer advocates.
The evidence is clear: traditional economic models—predicated on the assumption of rational behavior—fail to explain much of the volatility and inefficiency that characterize high-risk environments like Florida. Behavioral factors alone account for approximately 45% of the variance in consumer coverage decisions.
Now that recent tort reforms are having their desired effect, Brown’s paper and upcoming book are all about keeping those undeniable benefits from eroding as they have in the past.
I highly recommend you keep an eye out for his upcoming book and read Don Brown’s precursor white paper titled A Path to Resilience.
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