Risk attitudes towards on-demand insurance: an experimental study
Journal
The Geneva Papers on Risk and Insurance - Issues and Practice
ISSN
1018-5895
ISSN-Digital
1468-0440
Type
journal article
Date Issued
2024-10
Author(s)
Abstract
On-demand insurance products cover risks for short periods of time via a smartphone or other electronic device. Such insurance contracts give policyholders the freedom to choose when to be insured in a flexible way. On-demand contracts may change the way risk is perceived. Therefore, we conduct an experiment and show that individuals can become exceptionally risk-averse when offered short-term insurance. We show two main reasons for this result: first, the underlying risk is often overestimated by the subjects due to a miscalculation of the loss probabilities. Second, the shorter valuation horizon of on-demand insurance contracts leads to myopic loss aversion.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Palgrave Macmillan
Volume
50
Number
1
Start page
106
End page
141
Subject(s)
Division(s)