Natural disasters and the demand for health insurance

Amidst growing concerns over heightened natural disaster risks, this study pioneers an inquiry into the causal impacts of cyclones on the demand for private health insurance (PHI) in Australia. We amalgamate a nationally representative longitudinal dataset with historical cyclone records, employing an individual fixed effects model to assess the impacts of various exogenously determined cyclone exposure measures. Our findings reveal that only the most severe category 5 cyclones significantly increase the likelihood of individuals acquiring PHI in both the concurrent and subsequent years. Furthermore, the effect diminishes as the distance from the cyclone's eye increases. The largest estimated cumulated impact amounts to over 5 percentage points, representing approximately 11% of the sample mean and aligns with documented effects of certain PHI policies aimed at enhancing coverage. Furthermore, our findings withstand a series of sensitivity assessments, including a placebo test and three randomization examinations. Moreover, the cyclone impacts are more pronounced for younger demographics, individuals of higher socioeconomic status, and inhabitants of coastal or historically cyclone-affected areas. Additionally, after ruling out income, transfers, health status, and premiums as mechanisms, our study furnishes suggestive evidence that cyclone-induced home damage and heightened psychological stress are plausible pathways through which cyclones increase PHI uptake.