Risk attitudes towards on-demand insurance: an experimental study

Hsiaoyin Chang () and Hato Schmeiser ()
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Hsiaoyin Chang: University of St. Gallen
Hato Schmeiser: University of St. Gallen

The Geneva Papers on Risk and Insurance - Issues and Practice, 2025, vol. 50, issue 1, No 5, 106-141

Abstract: 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.

Keywords: On-demand insurance; Insurance demand anomaly; Behavioral economics; Cumulative prospect theory (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41288-024-00335-y

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