How do Optimistic Individuals Affect Insurance Advertisements?

Abstract

Some people have optimistic expectations regarding their accident probability, and thus, refrain from purchasing adequate insurance. This study investigates how insurance firms use advertisements to lower the ratio of optimistic individuals in the market. The main results are as follows: first, the optimal level of advertisements is maximized when the insurance premium is moderate. Second, the maximum level of advertisement varies according to the degree of optimism, which is measured by the difference between accurate and optimistic accident probabilities. Third, the advertisement decision is affected by the free-rider problem, and the equilibrium number of insurance firms with advertisement is always larger than that of firms without advertisement in a competitive insurance market.

Sustainability of Deposit Insurance Corporation for the Customers and Insurance Companies in Indonesia Paradigm

“…Public trust in the insurance company is an important point that must be maintained, as said by Christophe C and Cristina N (Courbage and Nicolas 2020). There is research conducted previously by Nurbaya Sari (Nurbaya, Zainal, and (Fujii et al 2020). Research on reinsurance companies has also been conducted (Han, Liang, and Young 2020).…”