Prudence, risk aversion, and the demand for life insurance

Eisenhauer, Joseph G.; Halek, Martin

doi:10.1080/135048599353429

Cited by 39 publications

(27 citation statements)

References 10 publications

(11 reference statements)

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“…Chesney and Louberge (1986) examine risk aversion along with the wealth effect and conclude that the two factors are not independent and one must consider both risk aversion and the effect of wealth on the demand for insurance. Eisenhauer and Halek (1999) later conclude that the prudence of the consumer plays a greater role than risk aversion in determining life insurance demand.…”

Section: Sej Theoretical Modelmentioning

confidence: 91%

An Examination of the Demand for Life Insurance

Zietz¹

2003

Risk Manage Insurance Review

133

106

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For almost 50 years researchers have sought to explain consumer behavior concerning the purchase of life insurance. This study examines the literature relating to specific demographic and economic factors that may be identifiable as traits influencing the demand for life insurance, and discusses general environmental issues that may relate to life insurance demand. By organizing the wealth of literature in a useful and systematic format, noting consistencies and contradictions, this examination seeks to provide a better understanding of how and why life insurance purchases are made. * Significance or sign depends on the regression technique or test performed.

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Section: Sej Theoretical Modelmentioning

confidence: 91%

An Examination of the Demand for Life Insurance

Zietz¹

2003

Risk Manage Insurance Review

133

106

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“…Unfortunately, empirical findings on the validity of the uniform DARA hypothesis have been mixed. Based on life insurance demand data, Eisenhauer (1997) and Eisenhauer and Halek (1999) have found positive correlations between life insurance demand and wealth (assets) and hence have rejected the uniform DARA hypothesis, using Mossin's (1968) proposition (Corollary 1 in this article). Szpiro (1983) finds only limited support for the DARA hypothesis based on nonlife insurance demand data.…”

Section: Some Important Implicationsmentioning

confidence: 76%

“…Interpretations of these results under some common asymmetric bell-shaped loss distributions are discussed. These results are particularly useful because many recent empirical studies (e.g., Szpiro, 1983;Eisenhauer, 1997;Eisenhauer and Halek, 1999) reject the uniform DARA hypothesis. Other empirical studies (e.g., Skinner, 1988;Kuehlwein, 1991;Guiso, Jappelli, and Terlizzese, 1992;Parker, 1999) on precautionary saving reject a positive third-derivative of utility functions and, therefore, indirectly reject the uniform DARA hypothesis.…”

Section: Introductionmentioning

confidence: 84%

When Is a Coinsurance‐Type Insurance Policy Inferior or Even Giffen?

Hau¹

2008

J of Risk & Insurance

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This article derives the necessary and sufficient conditions for a coinsurance-type insurance policy covering a particular risk to be inferior and to be Giffen. Mossin's decreasing absolute risk aversion assumption for insurance to be inferior is avoided. The result generalizes Hoy and Robson and Briys, Dionne, and Eeckhoudt's results to the case with a continuum of states and relaxes their assumption of constant relative risk aversion. It is shown that knowledge about the distribution of risk can be used to relax assumptions on an utility function for a coinsurance-type insurance policy to be inferior and to be Giffen. Copyright (c) The Journal of Risk and Insurance, 2008.

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“…Additional evidence could be cited as well Siegel and Hoban (1982),. for example, also found DRRA for narrowly defined wealth and IRRA for a broader wealth measure that included nonmarketable and contingent (i.e., uncertain) assets.2 This research encompasses such areas as investment behavior(Jackwerth, 2000), agricultural production and storage(Abdulkadri et al, 2003), insurance purchasing(Eisenhauer, 1997;Eisenhauer and Halek, 1998), and gambling(Hamid et al, 1996).…”

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confidence: 96%

Social Security Programs and Retirement Around the World: Micro‐Estimation, edited by Jonathan Gruber and David A. Wise

2007

J of Risk & Insurance

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Moshe A. Milevsky is one of the most skillful and engaging writers of our profession. His recent book, notwithstanding its rather daunting title-The Calculus of Retirement Income-is refreshingly written in a conversational first person voice and surpasses the already high expectations that his previous work has fostered.Professor Milevsky does a remarkable job at melding several disciplines in his text: financial economics, insurance, mathematics, and actuarial science. The text serves as a bridge for actuaries into the world of finance, and for financial economists into the world of pensions, insurance, and actuarial science. This user-friendly bridge is not only a notable achievement but an essential step toward joining the insights achievable through the various disciplines and equipping researchers to make further advances in the fields of pensions and retirement income.Milevsky introduces and develops, from the financial economics perspective, the basic actuarial models that underlie the pricing and risk analysis of life-contingent annuities, pensions, and life insurance. He handles the mathematical and actuarial models so deftly that a person with a basic understanding of calculus and finance would find his text quite accessible. Moreover, he sprinkles his analysis with practical and witty examples (such as folk wisdom from the famous Brazilian playboy, the late Jorge Guinle) that demonstrate to the reader their relevance and analytical power of the tools presented.He introduces the challenges of rational wealth decumulation at retirement through the metaphor of a drunk gambler he once witnessed who exhibited a rather curious roulette wagering and waitress tipping strategy. Here is not the place to reveal the parallels he draws between the drunk gambler and the retiree facing investment and consumption decisions, but suffice it to say that they rivet the reader's attention and impel her to turn the next page. Next, he presents the demographics and economics of what has been termed the central policy concern of our time-providing retirement security for our aging populations. 1

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Prudence, risk aversion, and the demand for life insurance

Cited by 39 publications

References 10 publications

An Examination of the Demand for Life Insurance

An Examination of the Demand for Life Insurance

When Is a Coinsurance‐Type Insurance Policy Inferior or Even Giffen?

Social Security Programs and Retirement Around the World: Micro‐Estimation, edited by Jonathan Gruber and David A. Wise

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