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Demand for insurance in a portfolio setting

Author

Listed:
  • Jack Meyer

    (Department of Economics, Michigan State University, 48824-1038 East Lansing Michigan)

  • Michael B. Ormiston

    (Department of Economics, Arizona State University, 85287-3806 Tempe Arizona)

Abstract

This paper takes an additional step toward analyzing the demand for insurance in the context of a portfolio model. An investor is endowed with a portfolio containing a risky and riskless asset that can be augmented by purchasing insurance. Here, insurance is paid for by reducing the quantity of the risky insurable asset, holding the quantity of the riskless asset fixed. In the standard insurance demand model, insurance is paid for by reducing the amount of the riskless asset. This distinction leads to a different insurance demand function because the opportunity cost of purchasing insurance is now random. The Geneva Papers on Risk and Insurance Theory (1995) 20, 203–211. doi:10.1007/BF01258397

Suggested Citation

  • Jack Meyer & Michael B. Ormiston, 1995. "Demand for insurance in a portfolio setting," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 20(2), pages 203-211, December.
    • Handle: RePEc:pal:genrir:v:20:y:1995:i:2:p:203-211
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    Cited by:

    1. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo.
    2. Loubergé, Henri & Watt, Richard, 2008. "Insuring a risky investment project," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 301-310, February.
    3. Ling Tian & Haisong Dong, 2022. "Family Life Cycle, Asset Portfolio, and Commercial Health Insurance Demand in China," IJERPH, MDPI, vol. 19(24), pages 1-18, December.
    4. Lin, Wen-chang & Lu, Jin-ray, 2012. "Risky asset allocation and consumption rule in the presence of background risk and insurance markets," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 150-158.
    5. Thomas Eichner & Andreas Wagener, 2004. "The Welfare State in a Changing Environment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 313-331, May.

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