 Bounded rationality in credit consumers' payment protection insurance decisions: the effect of relative cost and level of coverRob Ranyard and Sandie McHugh Journal of Risk Research, 2012, vol. 15, issue 8, 937-950 Abstract: A previous study found that credit consumers' decisions to purchase payment protection insurance (PPI) were surprising insensitive to changes in cost and level of cover. This was investigated further in a randomized-groups experiment in which these two factors and the cost of credit alternatives without PPI were systematically manipulated. High street bank customers ( N = 215) were presented with realistic PPI purchase scenarios and a questionnaire assessing their willingness to pay (WTP) for PPI and perceptions of its usefulness. It was found that: (1) WTP and PPI decisions were insensitive to relatively large changes in level of cover; (2) the perceived usefulness of Premium and Basic levels of cover were not significantly different, although their usefulness was a significant predictor of PPI decisions and (3) sensitivity of PPI decisions to changes in cost was dependent on the cost of credit without PPI. The first two findings are explained in terms of simplified mental representations and the evaluability of insurance cover. It is concluded that further research on the effects of the relative cost of insurance is needed. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:jriskr:v:15:y:2012:i:8:p:937-950 Ordering information: This journal article can be ordered from DOI: 10.1080/13669877.2012.686050 Access Statistics for this article Journal of Risk Research is currently edited by Bryan MacGregor More articles in Journal of Risk Research from Taylor & Francis Journals |
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