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Insurer Ambiguity and Maarket Failure

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  • Kunreuther, Howard
  • Hogarth, Robin
  • Meszaros, Jacqueline

Abstract

A series of studies investigate the decision processes of actuaries, underwriters, and reinsurers in setting premiums for ambiguous and uncertain risks. Survey data on prices reveal that all three types of these insurance decision makers are risk averse and ambiguity averse. In addition, groups appear to be influenced in their premium-setting decisions by specific reference points such as expected loss and the concern with insolvency. This behavior is consistent with a growing analytical and empirical literature in economics and decision processes that investigates the role that uncertainty plays on managerial choices. Improved risk-assessment procedures and government involvement in providing protection against catastrophic losses may induce insurers to reduce premiums and broaden available coverage. Copyright 1993 by Kluwer Academic Publishers

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Bibliographic Info

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

Volume (Year): 7 (1993)
Issue (Month): 1 (August)
Pages: 71-87

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Handle: RePEc:kap:jrisku:v:7:y:1993:i:1:p:71-87

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

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Cited by:
  1. Carole Bernard & Shaolin Ji & Weidong Tian, 2013. "An optimal insurance design problem under Knightian uncertainty," Decisions in Economics and Finance, Springer, vol. 36(2), pages 99-124, November.
  2. Oliver Walker & Simon Dietz, 2012. "Ambiguity and insurance: robust capital requirements and premiums," Grantham Research Institute on Climate Change and the Environment Working Papers 97, Grantham Research Institute on Climate Change and the Environment.
  3. Bernard Sinclair-Desgagné & Carel Vachon, 1999. "Dealing with Major Technological Risks," CIRANO Working Papers 99s-29, CIRANO.
  4. Howard Kunreuther & Mark Pauly, 2004. "Neglecting Disaster: Why Don't People Insure Against Large Losses?," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 5-21, January.
  5. Gollier, Christian, 2007. "The Determinants of the Insurance Demand by Firms," IDEI Working Papers 468, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Howard Kunreuther, 2006. "Reflections on U.S. Disaster Insurance Policy for the 21st Century," NBER Working Papers 12449, National Bureau of Economic Research, Inc.
  7. Théodora Dupont-Courtade, 2012. "Insurance demand under ambiguity and conflict for extreme risks : Evidence from a large representative survey," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00718642, HAL.
  8. repec:hal:journl:halshs-00718642 is not listed on IDEAS
  9. Langlais, Eric, 2010. "Safety and the Allocation of Costs in Large Accidents," MPRA Paper 25710, University Library of Munich, Germany.
  10. Albrecht, Peter & Maurer, Raimond, 1999. "Zur Bedeutung einer Ausfallbedrohtheit von Versicherungskontrakten - ein Beitrag zur Behavioral Insurance," Sonderforschungsbereich 504 Publications 99-76, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  11. Christian Gollier, 2005. "Some Aspects of the Economics of Catastrophe Risk Insurance," CESifo Working Paper Series 1409, CESifo Group Munich.
  12. repec:hal:journl:halshs-00429573 is not listed on IDEAS
  13. Haitao Yin, 2013. "Insurance Approach for Financing Extreme Climate Event Losses in China: A Status Analysis," EEPSEA Research Report rr2013035, Economy and Environment Program for Southeast Asia (EEPSEA), revised Mar 2013.
  14. Ert, Eyal & T. Trautmann, Stefan, 2012. "Sampling Experience Reverses Preferences for Ambiguity," Discussion Papers 164346, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.

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