Hypothetical Surveys and Experimental Studies of Insurance Demand: A Review

Abstract

We offer a structured literature survey of experimental studies involving insurance demand choices and their experimental methodology. With this, we aim to fulfill two goals. First, we want to give an overview of the status of the literature as is. Second, the overview of the methodology provides researchers with an idea of how insurance demand experiments can be designed and what the advantages and disadvantages of the different design aspects are. We thus offer a resource for the design of future experiments.

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

“…We think it is beneficial to have a focused study on LPHI risk, because decision making is markedly different than under HPLI risk. Our study differs from Jaspersen () in that we focus more prominently on LPHI risks, discuss findings in relation to theory and heuristics and interpret prior studies relative to natural world catastrophic loss. Therefore, in addition to results of LPHI risk in the experimental and survey study domain, we review the literature on market insurance data regarding catastrophic losses.…”

“…However, studies solely focusing on HPLI events are excluded. In total, 10 experimental and survey papers are included in this review which were not reviewed by Jaspersen () who also did not review studies based on market data.…”

“…Jaspersen () offers some critical remarks about using insurance decisions to test theories of decision making in experiment tasks. Insurance decisions do not correlate strongly with the way individuals make other financial decisions (Einav et al ., ).…”

“…Insurance decisions do not correlate strongly with the way individuals make other financial decisions (Einav et al ., ). Jaspersen () questions whether insurance decisions can offer insights for general theories other than whether or not they hold in the insurance domain. We conduct a review focused on insurance decisions and do not claim that findings from this literature can be generalized to other contexts.…”

“…Our review paper builds upon Jaspersen () who gave a general review of insurance demand studies for all kinds of risks, focusing on topics studied and some design methods employed. We think it is beneficial to have a focused study on LPHI risk, because decision making is markedly different than under HPLI risk.…”