Malaysia faces increasing flood risk intensified by rapid urbanization resulting in severe damage and rising economic losses, living quarters accounted for 40% of the total damage. Household coping strategies after flood disasters are often inadequate, creating strong dependency on government assistance. As the nation’s ‘insurer of last resort’, the burden of financing recovery has become an increasingly unsustainable challenge as floods become more frequent and severe. Experts highlight the need for alternative risk financing mechanisms, i.e., a national disaster insurance pool. However, such initiatives require government involvement, especially in Malaysia, where communities rely heavily on post-disaster assistance. Empirical studies rarely assess how this dependence influences household risk-financing decisions, revealing a significant gap in the literature. The study investigates whether government intervention moderates the relationship between flood risk factors (exposures, geophysical hazards and vulnerability), flood risk perception factors (cognitive, preparedness behavior, information search and social context) and moral hazard on household risk financing decisions. Using primary household survey data from flood-prone areas (254 valid responses), the study model was validated using PLS-SEM 4.0. The results show that government intervention significantly moderates the effects of geophysical hazard, vulnerability, cognitive and moral hazard. Increased government participation can foster public confidence, but heightened levels of support will lead to an increase in household moral hazard, where government intervention may diminish incentives for household preparedness. The study concludes that a national risk financing strategy must balance government measures with mechanisms that encourage households to adopt proactive flood management, ensuring long-term sustainability.
Tan et al. (2026) studied this question.