Assessing the Demand Factors for Residential Earthquake Insurance in Turkey: Empirical Evidence

The purpose of this study is to understand what the drivers of attitude towards purchasing insurance products are and which factors –both psychological, economical and consumer characteristics- affect consumers‘ purchase decisions. The structural equation modeling (SEM) seems to be the most suitable approach to look for the relationship between these variables because it accounts measurement errors of variables and give opportunity to identify both direct and indirect effects. The compulsory earthquake insurance (CEI) was introduced in 2000 as a result of the devastating impacts of 1999 Marmara Earthquake in Turkey. In the literature, previous studies examined only descriptive differences between consumers who buy or not earthquake insurance. In this study, we compare the importance of different factors by modeling consumer‘s buying decision next to focusing on purchase intention of non-owners of an earthquake insurance consumer in SEM framework. In the study, 800 households in six different regions of Ankara with different socio-economic characteristics are surveyed with simple random sampling. This study is a first study to apply structural equation modeling to the Turkish Catastrophe Insurance Pool claims data. Findings of the analysis will help insurance sector to design better policies to overcome unwillingness to buy earthquake insurance, to indicate how to approach to convince consumers to purchase insurance products.