Economic Experiments, Hypothetical Surveys and Market Data Studies of Insurance Demand Against Low‐probability/High‐impact Risks: A Systematic Review of Designs, Theoretical Insights and Determinants of Demand

Robinson, Peter; Botzen, Wouter

doi:10.1111/joes.12332

Cited by 23 publications

(16 citation statements)

References 124 publications

(187 reference statements)

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“…anchoring effect. Robust evidence in the literature (Coe, Belbase, & Wu, 2016;Robinson & Botzen, 2019) argues that this effect can be relevant when purchasing insurance. Based on the experiment by Johnson et al (1993), it was asked how much respondents would be willing to pay for certain insurance coverage in two locations.…”

Section: Risk Aversion By Marital Statusmentioning

confidence: 99%

Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics

Graminha¹,

Afonso

2022

Rev. adm. contemp.

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Objective: this paper analyzes how framing, anchoring, and certainty effects may affect the behavior of the consumer of auto insurance. Methods: an experiment was carried out, with the face-to-face application of six versions of a questionnaire with 14 questions, for 163 respondents from an educational institution. Questions were prepared to analyze the existence of the framing effect, the anchoring effect, and the certainty effect, in addition to the deductible effect (present in several insurance products). The theoretical framework of the paper is the behavioral economics. Results: younger people, singles, and men are more prone to risk. Although the findings in general corroborate the evidence in the literature, the results of the certainty effect were contrary to expectations. The payment of the deductible increased the respondents’ risk aversion. Conclusions: the existence of biases and heuristics can cause the purchase of insurance to occur in a non-optimal way. Knowledge of the decision-making process is important for insurers and consumers. It is also relevant for regulators, in order to subsidize measures aimed at market efficiency and consumer protection, through the design of an appropriate choice architecture.

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Section: Risk Aversion By Marital Statusmentioning

confidence: 99%

Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics

Graminha¹,

Afonso

2022

Rev. adm. contemp.

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“…Our experiment is a framed one (i.e., in the context of flood risk), therefore some context was warranted regarding the source of certain, risky and ambiguous government compensation. There are advantages to framing an insurance experiment in a specific context as summarized in a recent literature review by Robinson and Botzen (2019), such as external validity and in the absence of contextual framing individuals may make up their own. We tried to keep the source of certain, risky and ambiguous government compensation as neutral as possible, because offering more contextual richness (e.g., political factors and flooding experience), may have lead subjects to based their priors about government compensation more on contextual elements rather than the riskiness and ambiguity by and of itself.…”

Section: Insurance Purchase Decision Instructionsmentioning

confidence: 99%

“…According to Jaspersen (2016) and Robinson and Botzen (2019), we define a decision under risk as a situation where the probability of each possible outcome is known. If the probabilities are not known, and a distribution of probabilities over possible probabilities is not known either, the decision is considered one under ambiguity.…”

mentioning

confidence: 99%

An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand

Robinson¹,

Botzen

Zhou³

2021

J Risk Uncertain

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“…19. We direct the interested reader to Robinson and Wouter Botzen (2019), who provide a systematic review of 80 studies of insurance demand for low-probability, high-severity events.…”

Section: Household Risk Perceptionmentioning

confidence: 99%

The Earthquake Insurance Protection Gap: A Tale of Two Countries

Kelly

Bowen²,

McGillivray

2020

JIR

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In this paper, we examine reasons why take-up rates for earthquake insurance are significantly higher in the Lower Mainland of British Columbia than in western Washington state even though earthquake risk is largely the same. Achieving and maintaining high insurance take-up rates for catastrophic events matters because this can play an important role in improving the resiliency of communities. After exploring several factors known to influence the supply and demand of insurance for high-severity but low-frequency events, we find only two key differences: 1) disaster assistance is more readily available in the U.S.; and 2) Canadians are more willing to purchase earthquake insurance when they are told they should. We conjecture that many policy options to increase insurance take-up rates, such as product redesign or cross subsidization, are not likely to be effective in Washington. Making insurance mandatory—either via legislation, making earthquake coverage a prerequisite for a mortgage or embedding it into property taxes—might be the only viable way to increase take-up rates, although these options may be politically difficult to enact.

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Economic Experiments, Hypothetical Surveys and Market Data Studies of Insurance Demand Against Low‐probability/High‐impact Risks: A Systematic Review of Designs, Theoretical Insights and Determinants of Demand

Cited by 23 publications

References 124 publications

Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics

Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics

An experimental study of charity hazard: The effect of risky and ambiguous government compensation on flood insurance demand

The Earthquake Insurance Protection Gap: A Tale of Two Countries

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