Assessing the Demand Factors for Residential Earthquake Insurance in Taiwan: Empirical Evidence on Spatial Econometrics

The residential earthquake insurance of 2002 created additional protected residential earthquake insurance plan, under which residential earthquake insurance is available to individuals from insurance industry in Taiwan. Earthquake damages that occurrence in Taiwan remain largely uninsured losses despite the efforts of governmental and private insurance programs. Spatial Econometrics has been recognized as one of the top key issues in residential earthquake insurance demand field. The demand factors for residential earthquake insurance have been proved to be either directly or indirectly related to many interdependent environment variables, such as disposal income, government subsidized and region. Previous researches only focused on individual’s behavior issues, no different spatial research framework has been proposed before. This paper applies spatial econometrics theory together with spatial autocorrelation and panel regression models to investigate the relationship between insurance demand and disposal income, government subsidized, area/spatial in Taiwan’s conditions during the period 2002 through 2004. The results of this paper indicate that government subsidized loan is significantly negative relationship with demand for residential earthquake insurance, which was to the contrary of the hypothesis. Disposal income and spatial variables are significantly positive relationship with demand for residential earthquake insurance, which was to the accord with the hypothesis. Although region has significant effects on Contemporary Management Research 348 the demand for residential earthquake insurance in Taiwan, the more improving the ability of explanations can be contributed by the spatial effect model if spatial variable is linked with demand for residential earthquake insurance.