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Risk attitudes towards on-demand insurance: an experimental study

Author

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  • Hsiaoyin Chang

    (University of St. Gallen)

  • Hato Schmeiser

    (University of St. Gallen)

Abstract

On-demand insurance products cover risks for short periods of time via a smartphone or other electronic device. Such insurance contracts give policyholders the freedom to choose when to be insured in a flexible way. On-demand contracts may change the way risk is perceived. Therefore, we conduct an experiment and show that individuals can become exceptionally risk-averse when offered short-term insurance. We show two main reasons for this result: first, the underlying risk is often overestimated by the subjects due to a miscalculation of the loss probabilities. Second, the shorter valuation horizon of on-demand insurance contracts leads to myopic loss aversion.

Suggested Citation

  • Hsiaoyin Chang & Hato Schmeiser, 2025. "Risk attitudes towards on-demand insurance: an experimental study," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 50(1), pages 106-141, January.
    • Handle: RePEc:pal:gpprii:v:50:y:2025:i:1:d:10.1057_s41288-024-00335-y
    DOI: 10.1057/s41288-024-00335-y
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