This article, by Talia Bartosch, is part of a series highlighting members of the Office of Sustainability’s Experts Database. In a collaboration with instructor Hannah Monroe’s course, LSC 561: Writing Science for the Public, students interviewed campus sustainability experts and produced short feature stories.
A new study finds that those with a higher income receive greater monetary support through crowdfunding sources like GoFundMe compared to those with lower incomes.
The study, co-authored by Philip Mulder, assistant professor of Risk and Insurance at UW–Madison, reveals that people are more likely to donate to online fundraisers after natural disasters because the organizers have wider social connections, possibly because of their wealth.
“Even if homeowner’s insurance markets aren’t perfect and there are some holes in the social safety net, the hope is that private charity and people who have altruistic impulses can help fill some of those holes and gaps,” he said. But “when we think about cases like underinsurance as a policy problem that people are trying to solve, even though you hear that people raise a lot of money on GoFundMe for help, that’s not filling in those inequities.”
Mulder first became interested in this field of research as he was learning about health insurance markets, policy discussions around how to make them work better, and how these markets affect businesses, households, and individuals.
“Many of the same challenges, like affordability and aligning the incentives that people have in these markets to make them sustainable, not only appear in health insurance markets but also disaster insurance markets,” he said.
Mulder’s current study looks into the crowdfunding efforts after the Marshall Fire at the end of 2021, a wildfire that destroyed more than a thousand homes in Boulder County, Colorado, and became the costliest wildfire in the state’s history.
In the aftermath, most homeowners learned they were underinsured, and the payout was not enough to rebuild their homes.
Emergency federal grants and loans also take significant time for processing and disbursement. People needed money, and they needed it fast. A wildfire fund was created by Community Foundation Boulder County with more broad community support, especially for those that needed the most help, but there were several strings attached. As a result, people turned to the next best thing: GoFundMe.
Mulder and his colleagues gathered information from 975 GoFundMe campaigns that specified an individual or household as the beneficiary and linked those beneficiaries to public records to learn more about them, including estimates of their incomes. The group found that beneficiaries from GoFundMe campaigns with an income above $150,000 received more support, almost 30 percent more, than those with an income below $75,000. And those with a higher income were also more likely to have a GoFundMe campaign in the first place.
They ascertained that the findings result from a personal network mechanism. People give to who they know, and higher-income households will get more support because they know people who can donate in large amounts.
“We were surprised to see this relationship in the first place,” Mulder said. “I don’t think any of us doubt that it’s the people with lower incomes who have higher needs after the disasters, but it’s just sort of an inevitable outcome that people are giving to the people they know.”
If all of the available funding sources after natural disasters have disadvantages, how can those at risk of losing their home to a natural disaster be prepared?
Mulder hopes that all actors involved in this problem — government, insurance companies, and households — see the value of information from these studies to better coordinate responses to natural disasters, especially at a time when climate change only increases the chances of their occurrence. Making this information more accessible to the public would allow homeowners to understand their risk and make changes to their insurance policy to be best prepared for what’s to come.
“In a time with tight budgets and where changing the prices people pay for insurance can be controversial, there’s a temptation to develop the models you need but skip over the dissemination of those models, but I think those are real public good,” Mulder said. “When you communicate to people that the place they are living in has high risk, it can lead that home to be built differently and create more sustainable housing markets in those communities.”