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Propitious Selection in Insurance

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  • Hemenway, David
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    Abstract

    The theory of propitious selection suggests that there are risk-avoiding personalities who both take physical precautions and buy financial security (insurance). Conversely, there are risk seekers who tend to do neither. Survey evidence is presented that is consistent with the theory. Individuals who obtain motor vehicle liability coverage are less likely than others to drink-and-drive, and are more likely to engage in health-beneficial (risk-avoiding) behaviors. Propitious selection may be a general phenomenon promoting favorable selection in many real world insurance markets. Copyright 1992 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Risk and Uncertainty.

    Volume (Year): 5 (1992)
    Issue (Month): 3 (July)
    Pages: 247-51

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    Handle: RePEc:kap:jrisku:v:5:y:1992:i:3:p:247-51

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    Web page: http://www.springerlink.com/link.asp?id=100299

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    Cited by:
    1. Jullien, Bruno & Salanié, Bernard & Salanié, François, 2001. "Screening Risk Averse Agents Under Moral Hazard," CEPR Discussion Papers 3076, C.E.P.R. Discussion Papers.
    2. Philippe Donder & Jean Hindriks, 2009. "Adverse selection, moral hazard and propitious selection," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 73-86, February.
    3. DE DONDER, Philippe & HINDRIKS, Jean, 2006. "Does propitious selection explain why riskier people buy less insurance?," CORE Discussion Papers 2006032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Hanming Fang & Michael P. Keane & Dan Silverman, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," NBER Working Papers 12289, National Bureau of Economic Research, Inc.
    5. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
    6. Bruno Jullien & Bernard Salanié & François Salanié, 2007. "Screening risk-averse agents under moral hazard: single-crossing and the CARA case," Economic Theory, Springer, vol. 30(1), pages 151-169, January.
    7. Dorothy Robyn & Katherine Swartz, 1993. "Insights," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(2), pages 359-363.

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