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The behavioral welfare economics of insurance

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  • Glenn W. Harrison

    () (Georgia State University
    University of Cape Town)

Abstract

Behavioral economics poses a challenge for the welfare evaluation of insurance products and policy. It demands that we recognize that the descriptive account of behavior toward insurance depends on risk and time preferences that might not be the ones we were all taught, and still teach, and that subjective beliefs might not accord with actuarial assessments of loss probabilities. Challenging as that can be, things become even harder when we jettison naive notions of revealed preferences as the basis for evaluating the individual welfare of insurance decisions. These challenges demand theory, datasets that allow us to identify structural models, datasets that allow us to observe those that do not purchase insurance, appropriate econometric methods, and particularly pay close attention to the methodological nonsense that is often used to justify policy interventions.

Suggested Citation

  • Glenn W. Harrison, 2019. "The behavioral welfare economics of insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(2), pages 137-175, September.
  • Handle: RePEc:pal:genrir:v:44:y:2019:i:2:d:10.1057_s10713-019-00042-y
    DOI: 10.1057/s10713-019-00042-y
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