Abstract
The psychology of insurance decision making is a domain of utility-based theories such as subjectively expected utility (SEU) and prospect theory, and of those based on bounded rationality and psychological processes, such as the positive theory of insurance demand. This chapter reviews research (including the mentioned theories) on the psychology of insurance as a risk protection decision. Insurers themselves can be influenced in ways which encourage them to put others at risk, including their policyholders, employees, competitors, and government regulatory machinery. From this broader perspective, both mis-selling and fraudulent claims can be seen as part of the intrinsic and embedded problem of moral hazard that infuses insurance behaviour and society. This chapter considers the nature and causes of insurance mis-selling and reviews approaches to consumer protection. Following this, it also considers the role of evolving government regulatory activity, and the practices of insurance firms to prevent moral hazard and insurance fraud.
| Original language | English |
|---|---|
| Title of host publication | Economic Psychology |
| Publisher | Wiley-Blackwell |
| Pages | 451-467 |
| Number of pages | 17 |
| ISBN (Electronic) | 9781118926352 |
| ISBN (Print) | 9781118926345 |
| DOIs | |
| Publication status | Published - 1 Jan 2017 |
Bibliographical note
Publisher Copyright:© 2018 John Wiley & Sons Ltd.
Keywords
- Bounded rationality
- Consumer protection
- Economic psychology
- Insurance behaviour
- Insurance deterrence
- Insurance fraud
- Insurance purchase decisions
- Prospect theory
- Risk protection
- Subjectively expected utility