Why Do Half of Households in the French Overseas Departments Not Purchase House Insurance?

In France comprehensive house insurance includes coverage against natural disasters. Whereas the French overseas departments are more exposed to natural risks than continental France, only 52% of households in overseas departments have purchased house insurance for their main home in 2006, against more than 99% in continental France. We explain simultaneously the probability of being insured and the insurance premium, and we model that the decision of purchasing insurance depends on insurance price. Our results do not reveal a supply limitation but a low demand for insurance. Firstly, households living in traditional individual dwellings - which often do not meet building standards and may have been built without permit - do probably not consider insurance purchase. Secondly, households rely on financial assistance by government, local authorities or relatives in case of natural disaster ; they purchase comprehensive house insurance mainly to be covered against other risks included in the policy.