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The Effect of Pre-commitment and Past-Experience on Insurance Choices: An Experimental Study*

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  • Thomas Papon

    (EUREQua, UMR 8594, Maison des Sciences Economiques 106 boulevard de l'hôpital, 75 647 Paris cedex 13 France.)

Abstract

This paper reports results from an experimental study that investigates insurance behaviors in low-probability, high-loss risk situations. The study reveals that insurance behaviors may depend on the length of the commitment period of insurance policies, namely the period during which individuals commit themselves to maintain the same insurance decision. The results of this study also seem to support the predictions of the Dual Theory concerning the demand for co-insurance policies, that is to say the preference of individuals for extreme (null or full) levels of insurance coverage. This study also suggests that prior risk occurrences influence subsequent insurance choices. The paper provides a new possible explanation about the puzzling fact that people usually fail to obtain insurance against disaster-type risks such as natural disasters, even when premiums are close to actuarially fair levels. The Geneva Risk and Insurance Review (2008) 33, 47–73. doi:10.1057/grir.2008.8

Suggested Citation

  • Thomas Papon, 2008. "The Effect of Pre-commitment and Past-Experience on Insurance Choices: An Experimental Study*," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 33(1), pages 47-73, June.
    • Handle: RePEc:pal:genrir:v:33:y:2008:i:1:p:47-73
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    Cited by:

    1. Chiharu Ishida & Woojung Chang & Steve Taylor, 2016. "Moral intensity, moral awareness and ethical predispositions: The case of insurance fraud," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 21(1), pages 4-18, March.
    2. Johannes G. Jaspersen & Vijay Aseervatham, 2017. "The Influence of Affect on Heuristic Thinking in Insurance Demand," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(1), pages 239-266, March.
    3. Howard Kunreuther & Erwann Michel-Kerjan, 2015. "Demand for fixed-price multi-year contracts: Experimental evidence from insurance decisions," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 171-194, October.
    4. Rene Schwaiger & Laura Hueber, 2021. "Do MTurkers Exhibit Myopic Loss Aversion?," Working Papers 2021-12, Faculty of Economics and Statistics, Universität Innsbruck.
    5. Gabriela-Mihaela MURESAN, 2019. "Public Perception Of Insurance In Romania: A Survey Of Insurance Consumers And Non-Consumers," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(21), pages 1-5.
    6. Johannes G. Jaspersen, 2016. "Hypothetical Surveys And Experimental Studies Of Insurance Demand: A Review," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 217-255, January.

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