12. Perceived Preparedness and Attitude of Japanese Households Toward Risk Mitigation Activities Following the Great East Japan Earthquake: Earthquake Insurance Purchase and Seismic Retrofitting

The Great East Japan Earthquake and the subsequent tsunami on March 11, 2011, were a wake-up call for Japan’s enormous earthquake risk and the need for appropriate measures to mitigate disasters. We use unique survey data collected after the earthquake to examine how consumers reacted to this catastrophic event. We find that self-reported, perceived preparedness for natural disasters has significantly improved even among low-income households after March 11, but that post-quake intentions for more specific risk mitigation activities were systematically associated with household income and wealth levels. High-income households are more likely to plan the purchase of earthquake insurance or to conduct seismic retrofitting following the March 11 earthquake, indicating that the recent events might have widened the gap in disaster preparedness between rich and poor. Obviously, earthquake insurance is one of the most effective measures for mitigating earthquake losses. Nonetheless, despite increased disaster awareness and preparedness following the March 11, 2011 earthquake, the proportion of Japanese households covered by earthquake insurance is still low. We aim to reveal the reasons deterring people from purchasing earthquake insurance. Moreover, our dataset has enabled us to analyze the post-quake attitudes by households that have not taken out earthquake insurance. Our empirical results suggest that typical homeowners would like to purchase insurance in response to the recent earthquake. However, we have also found these post-quake responses to be heterogeneous. That is, households with substantial home equity are more likely to be dissatisfied with the current earthquake insurance system and are therefore reluctant to purchase new insurance. The current Japanese earthquake insurance system restricts the amount of insurance benefits and imposes expensive insurance premiums on consumers who require high compensation. These limitations apparently prevent homeowners from purchasing earthquake insurance.