The frequency and consequences of natural disasters in China have risen due to climate change, resulting in increased economic losses. This paper investigates how China’s insurance industry (as suppliers) and the Chinese people (as consumers) view natural disaster insurance. Insurance companies hesitate to offer insurance coverage against natural disasters because of institutional barriers (e.g., existing accounting and tax regulations and the fact that natural disaster coverage is not considered a separate category), low demand from consumers and the ambiguity associated with natural disasters.
It was found that people had a low demand for insurance because of three major reasons: a) the perception of “It won’t happen to me”, b) budgetary constraints, and c) a deep distrust in the insurance industry. It was also found that people tended to avoid insurance offered by small-scale insurance companies and strongly favored government insurance. These analyses suggest that neither the current public nor private approach presents an adequate solution to the challenge of financing natural disaster losses in China. Government-business collaboration may provide a viable alternative.