On Optimal Insurance Purchasing

Lee, Hyong J.; Pinches, George E.

doi:10.2307/253286

The Journal of Risk and Insurance

1988

DOI: 10.2307/253286

|View full text |Cite

On Optimal Insurance Purchasing

Hyong J. Lee¹,

George E. Pinches²

Help me understand this report

Search citation statements

Order By: Relevance

Paper Sections

Select...

Citation Types

Supporting

Mentioning

Contrasting

Year Published

1993

2016

Publication Types

Select...

Article2

Relationship

Self Cite0

Independent2

Authors

Journals

Cited by 2 publications

(1 citation statement)

References 4 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Briys and Loubergé () demonstrate that if an individual follows the Hurwicz () criterion then the individual does not insure at all or buys full insurance even if the insurance loading is positive. On the other hand, Lee and Pinches () show that by introducing risk aversion to the Hurwicz criterion, partial insurance can also be optimal. Machina (, , p. 56) shows that Mossin's full‐coverage result does hold in a very general non‐EU framework that assumes probabilistic sophistication.…”

mentioning

confidence: 99%

EVALUATING THE EXPECTED WELFARE GAIN FROM INSURANCE

Harrison¹,

Ng²

2016

J of Risk & Insurance

View full text Add to dashboard Cite

Economic theory tells us how to evaluate the expected welfare gain from insurance products on offer to individuals. If we know the risk preferences of the individual, and subjective beliefs about loss contingencies and likelihood of payout, there is a certainty equivalent of the risky insurance policy that can be compared to the certain insurance premium. This simple logic extends to nonstandard models of risk preferences, such as those in which individuals exhibit “optimism” or “pessimism” about loss contingencies in their evaluation of the risky insurance policy. We illustrate the application of these basic ideas about the welfare evaluation of insurance policies in a controlled laboratory experiment. We estimate the risk preferences of individuals from one task, and separately present the individual with a number of insurance policies in which loss contingencies are objective. We then estimate the expected consumer surplus gained or foregone from observed take‐up decisions. There is striking evidence of foregone expected consumer surplus from incorrect take‐up decisions. Indeed, the metric of take‐up itself, widely used in welfare evaluations of insurance products, provides a qualitatively incorrect guide to the expected welfare effects of insurance.

show abstract

mentioning

confidence: 99%

EVALUATING THE EXPECTED WELFARE GAIN FROM INSURANCE

Harrison¹,

Ng²

2016

J of Risk & Insurance

View full text Add to dashboard Cite

show abstract

Asymmetries and household insurance

Eisenhauer

1993

Insurance: Mathematics and Economics

View full text Add to dashboard Cite

scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.

Contact Info

customersupport@researchsolutions.com

10624 S. Eastern Ave., Ste. A-614

Henderson, NV 89052, USA

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Blog Terms and Conditions API Terms Privacy Policy Contact Cookie Preferences Do Not Sell or Share My Personal Information

Made with 💙 for researchers

Part of the Research Solutions Family.

On Optimal Insurance Purchasing

Cited by 2 publications

References 4 publications

EVALUATING THE EXPECTED WELFARE GAIN FROM INSURANCE

EVALUATING THE EXPECTED WELFARE GAIN FROM INSURANCE

Asymmetries and household insurance

Contact Info

Product

Resources

About