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Mental Accounting, Access Motives, and Overinsurance

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  • Markus Fels

Abstract

The access motive for insurance posits that insurance derives its value from providing access to a loss remedy that is unaffordable without insurance. I explore the potential of this alternative insurance motive to explain attitudes towards modest risks, and I argue that mental accounting makes the access motive relevant for understanding both the popularity of warranties and the avoidance of deductibles. The value of partial insurance is shown to critically depend on the way in which the insurer pays benefits. This can explain several empirical regularities that are difficult to reconcile within existing models.

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  • Markus Fels, 2020. "Mental Accounting, Access Motives, and Overinsurance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 675-701, April.
    • Handle: RePEc:bla:scandj:v:122:y:2020:i:2:p:675-701
    DOI: 10.1111/sjoe.12336
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    Cited by:

    1. Betz, Frank & Hautsch, Nikolaus & Peltonen, Tuomas A. & Schienle, Melanie, 2016. "Systemic risk spillovers in the European banking and sovereign network," Journal of Financial Stability, Elsevier, vol. 25(C), pages 206-224.
    2. Alexander K. Koch & Julia Nafziger, 2019. "Correlates of Narrow Bracketing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1441-1472, October.
    3. Borissov, Kirill & Pakhnin, Mikhail & Puppe, Clemens, 2017. "On discounting and voting in a simple growth model," European Economic Review, Elsevier, vol. 94(C), pages 185-204.
    4. Falk, Armin & Szech, Nora, 2016. "Pleasures of skill and moral conduct," Discussion Papers, Research Unit: Economics of Change SP II 2016-301, WZB Berlin Social Science Center.
    5. Markus Fels, 2020. "On the value of Medicaid in providing access to long‐term care," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 933-948, August.
    6. Fels, Markus, 2019. "Risk Attitudes with State-Dependent Indivisibilities in Consumption," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203489, Verein für Socialpolitik / German Economic Association.
    7. Markus Fels, 2020. "Incentivizing efficient utilization without reducing access: The case against cost‐sharing in insurance," Health Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 827-840, July.
    8. Sai Krishnan S. & Subramanian S. Iyer & Sai Balaji SMR, 2022. "Insights from behavioral economics for policymakers of choice‐based health insurance markets: A scoping review," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(2), pages 115-143, June.
    9. Fels, Markus, 2021. "Why Do People Buy Insurance? A Modern Answer to an Old Question," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242418, Verein für Socialpolitik / German Economic Association.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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