5.1 RESEARCH APPROACH STEP 1 THIS THESIS CONCERNS ECONOMIC AS WEL...

1.5.1  Research  Approach  

Step 1

This thesis concerns economic as well as social benefits from private flood insurance systems.

Consequently, for a national flood insurance system to be considered to be effective it has to deliver

benefits not only to the insurer and the insured but also to the wider society in which it operates.

Benefits to society will, however, only accrue if the system is financially viable and also economically

efficient. Yet, it is the lack of financial stability along with the economic difficulty insurers face in

assessing flood risk in the Netherlands that has frequently been cited by the industry as two reasons

why flood insurance there is troubling. Therefore, if the introduction of private flood insurance to the

Netherlands is to be of benefit both to the insurers and to Dutch society it must overcome these two

challenges.

As there is currently no national flood insurance in operation in the Netherlands, it is necessary to look

to other countries and also literature to find out how these systems are effective before it is possible to

understand what lessons might be applicable to the Dutch context. The first research step of this thesis

will therefore be to understand what are the main components of an effective national flood insurance

system. The following question is addressed in the first step of this research:

SQ1: What are the main components of effective national flood insurance systems?

This research question will explore relevant scientific literature on both general principles of insurance

and those concepts that relate specifically to flood insurance. Any additional theories relating to flood

insurance will also be examined if they contribute relevant knowledge to address the research

questions in hand.

The output of the first step of the research will be an identification of the main components of flood

insurance systems and an understanding of how flood insurance systems operate to be effective.

These components will be applied as a basic analytical framework to understand the operation of

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different types of national flood compensation systems in practice and facilitate more meaningful cross

country comparisons in subsequent research steps.

Step 2

Flood compensation in the Netherlands is currently based on a public system. With a few exceptions no

flood insurance has been available there since the 1950s. It is therefore necessary to examine the

operation of flood insurance systems in other countries to shed light on the potential benefits private

flood insurance might bring to the Netherlands. The components of flood insurance systems identified

in the previous research step will be used as an analytical framework to enable cross country

comparisons. Three case study flood insurance systems have been selected: UK, France and Belgium.

The justification for why these countries were chosen is described in detail in the next section. These

three case studies are analysed to answer the following two sub-questions:

SQ2a: What are the characteristics and effects of flood insurance systems in practice?

In addition to finding out the attributes and effects of different flood insurance systems, the main

research question also calls for an understanding of the social and economic benefits. As these are

difficult to quantify at the national level without significantly more research resources than were

available for this thesis, the next best alternative it is to take into account how the performance of each

national flood insurance system is regarded in the general media and also scientific literature. The

following question will be therefore be answered for each case study:

SQ2b: What is the normative discourse around different flood insurance systems in practice?

The purpose of this step is to gain greater understanding of the operation of national flood insurance

systems in practice. Data is therefore gathered from selected academic literature but also more up to

date news sources such as websites, newspapers and trade journals.

Step 3

After each of the national flood insurance systems from the three case study countries have been

analysed, it is necessary to understand what practice based conditions lead to the effectiveness of

each system. This is a highly complex task in which there are many factors at play. To attempt to

navigate through this complexity, the framework of flood insurance system components and the

understanding of what it is to be effective from the first research step will again be used to make

comparisons across systems. The following research sub-question will therefore be answered:

SQ3: What conditions contribute to effectiveness of national flood insurance systems in

practice?

The output of this step will be an understanding of the differences and similarities between the three

cases and knowledge of how each system of flood insurance is effective. The output will be structured

using the analytical framework from the first research step. The information collected is also verified

through the in depth questions used during the expert interviews.

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Step 4

To understand whether elements of private flood insurance from these systems can be beneficial to the

Netherlands, it is necessary to know the characteristics of the current flood risk compensation system in

the Netherlands including recent proposed changes to the system. The following research sub-

question will therefore be addressed:

SQ4: Are the conditions present to introduce a private flood insurance system in the

Netherlands?

The output of this research step will be an understanding of the conditions necessary for transitioning to

a system of private flood insurance.

Step 5

This final step will attempt, through a conclusion and discussion, to address the main research question

by aggregating the answers from the previous research steps. Limitations to the research methodology

and suggestions for future research will be outlined.