Small area estimation of household expenditure on insurance programs for minimizing the impact of natural disasters in West Java, Indonesia

Abstract

West Java is one of Indonesia’s Provinces with a high disaster risk index. The Province has experienced earthquakes, volcanic eruptions, tidal waves, droughts, landslides, floods and tsunamis. In the event of a disaster, the government’s budget allocation is used for handling losses due to disasters. Seeing these conditions, it is necessary to carry out disaster risk management efforts to reduce losses by using natural disaster insurance by households. Publication of household insurance expenditures is essential to see the community’s ability to pay insurance for handling losses due to disasters. This study aims to estimate the average household expenditure on insurance and the average total household expenditure by district/city in the West Java Province. The analytical method used is the Small Area Estimation using the Fay-Herriot model with logarithmic transformation. The data source is the National Socio-Economic Survey (SUSENAS) for March 2019. The results show the proportion of insurance expenditure to total household expenditure (ability to pay) was relatively low, ranging from 0.93%–2%. This result is still far from the ability to pay insurance in developing countries, which is 5%. This finding can be used to see the power of households to pay for insurance (ability to pay). The government can take policies related to this to minimize losses due to natural disasters in the West Java Province.