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Willingness to take financial risks and insurance holdings: A European survey

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  • Eling, Martin
  • Ghavibazoo, Omid
  • Hanewald, Katja

Abstract

We investigate the relationship between self-reported willingness to take financial risks and ownership of life insurance and long-term care insurance. For a representative sample of individuals aged 50+ from 14 countries and controlling for demographic and socioeconomic determinants of insurance demand, we find a positive link between willingness to take financial risks and ownership of both long-term care insurance and life insurance. The link is stronger for whole life insurance compared to term life insurance and long-term care insurance. Two robustness tests that (i) use risky asset ownership instead of willingness to take financial risks and (ii) focus on specific demographic and socioeconomic groups confirm the results for life insurance, while the results for long-term care insurance are less clear. Our empirical results cannot be explained by the classical expected utility framework and thus support recent research indicating that alternative models (e.g., higher-order risk attitudes or prospect theory) are needed to explain insurance demand.

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  • Eling, Martin & Ghavibazoo, Omid & Hanewald, Katja, 2021. "Willingness to take financial risks and insurance holdings: A European survey," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    • Handle: RePEc:eee:soceco:v:95:y:2021:i:c:s221480432100121x
    DOI: 10.1016/j.socec.2021.101781
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    Cited by:

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    3. Monica Laura Zlati & Romeo Victor Ionescu & Valentin Marian Antohi, 2022. "Modelling the Vulnerability of Financial Accounting Systems during Global Challenges: A Comparative Analysis," Mathematics, MDPI, vol. 10(9), pages 1-21, April.

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    More about this item

    Keywords

    Risk attitudes; Long-term care insurance; Life insurance; SHARE data;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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