Why Do People Buy Insurance? A Modern Answer to an Old Question

Konferenzbeitrag

I revisit the question of which motive underlies insurance demand. I draw on the literature of state-dependent utility and on the literature of imperfectly divisible consumption to argue that the general purpose of insurance is not a risk transfer, but meeting a conditional need. In this way, insurance aligns the risk in one's ftnancial endowment with the risk in one's ftnancial needs. This generalization extends the classical view of insurance. I show how this extension greatly simpliftes the generalization of classic results. I also discuss how the novel deftnition has implications for our discipline's research agenda and policy advice

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2021: Climate Economics

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Behavior: Underlying Principles ; Criteria for Decision-Making under Risk and Uncertainty ; Insurance; Insurance Companies; Actuarial Studies
• Subject: Insurance ; Risk Aversion ; State Dependence ; Divisibility of Consumption ; Risk Preferences

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fels, Markus
• Event: Veröffentlichung
• (who): ZBW - Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/242418
• Last update: 10.03.2025, 11:42 AM CET