Framing and insurance choices

Abstract

The presentation of objective information should not affect a rational decision-maker; however, in practice, it often does. This paper studies the effect of the framing of contingencies on insurance choices. In several experiments, we presented participants with differently framed insurance tasks, where they had to choose deductibles against two different types of losses.The treatment group received a broad description of the risky situation and was asked to decide on the deductibles jointly, whereas the control group received a narrow description of the same task and was asked to decide on the deductibles separately. We discovered that the distribution of the insurance premium paid was identical in all groups, but the actual choices of the insurance plans were significantly diverse: On average, the treatment group preferred more similar deductibles than did the control group. These results indicate the importance of framing in insurance decision-making.

Insurance demand experiments: Comparing crowdworking to the lab

“…They use a university sample and also recruit online subjects from a previous survey of households in flood-prone areas; their main results are similar across the groups and so they report detailed results for the student sample only. Burkovskaya et al (2021) and Ragin et al (2021) each conduct insurance demand experiments with a university sample and an online sample recruited via MTurk. Both studies frame the online experiment as a robustness test of their laboratory results and find support for their main result, though neither study explicitly tests for differences in insurance demand between the two groups.…”

Insurance Demand Experiments: Comparing Crowdworking to the Lab

“…They use a university sample and also recruit online subjects from a previous survey of households in flood-prone areas; their main results are similar across the groups and so they report detailed results for the student sample only. Burkovskaya et al (2021) and Ragin et al (2021) each conduct insurance demand experiments with a university sample and an online sample recruited via MTurk. Both studies frame the online experiment as a robustness test of their laboratory results and find support for their main result, though neither study explicitly tests for differences in insurance demand between the two groups.…”

Encouraging resiliency through autoenrollment in supplemental flood insurance coverage

“…In theory, piggybacking “flood‐resilience” insurance coverage on top of a standard flood policy could provide the liquidity to fund the upfront costs of adaptation measures. It is unknown, however, how consumers would respond to such coverage and consumer demand may be influenced by behavioral strategies in how such a product is framed and marketed, making it challenging to assess underlying preferences (e.g., Burkovskaya & Adam Teperski, 2022; Meyer & Kunreuther, 2017; Thaler & Cass, 2008).…”