Willingness to take financial risks and insurance holdings: A European survey

Martin Eling, Omid Ghavibazoo and Katja Hanewald

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2021, vol. 95, issue C

Abstract: We investigate the relationship between self-reported willingness to take financial risks and ownership of life insurance and long-term care insurance. For a representative sample of individuals aged 50+ from 14 countries and controlling for demographic and socioeconomic determinants of insurance demand, we find a positive link between willingness to take financial risks and ownership of both long-term care insurance and life insurance. The link is stronger for whole life insurance compared to term life insurance and long-term care insurance. Two robustness tests that (i) use risky asset ownership instead of willingness to take financial risks and (ii) focus on specific demographic and socioeconomic groups confirm the results for life insurance, while the results for long-term care insurance are less clear. Our empirical results cannot be explained by the classical expected utility framework and thus support recent research indicating that alternative models (e.g., higher-order risk attitudes or prospect theory) are needed to explain insurance demand.

Keywords: Risk attitudes; Long-term care insurance; Life insurance; SHARE data (search for similar items in EconPapers)
JEL-codes: D81 D90 G22 J14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:95:y:2021:i:c:s221480432100121x

DOI: 10.1016/j.socec.2021.101781

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