What if compulsory insurance triggered self-insurance? An experimental evidence

Anne Corcos, François Pannequin and Claude Montmarquette
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Anne Corcos: CURAPP-ESS UMR 7319, CNRS and Université de Picardie Jules Verne

No 23-01, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: Although it avoids the negative externalities associated with the damages caused by uninsured individuals, compulsory insurance raises the issue of insurance crowding out prevention. Interestingly, Pannequin and Corcos ((2020)) show that on a theoretical level, although compulsory insurance and self-insurance (prevention investments dedicated to loss reduction) are substitutes for risk averters, they are complementary for risk lovers. The present contribution aims to test, in the Lab, these surprising results using a model-based experimental design. Our experimental results support the theoretical predictions: compulsory insurance and self-insurance are complementary for risk lovers and substitutes for risk averters. This contribution fully supports public policies that aim to implement mandatory insurance. Far from deterring prevention activities and providing that its level is high enough, mandatory insurance increases prevention levels.

Keywords: compulsory insurance; self-insurance; experiment; risk-attitudes; substitutability; complementarity (search for similar items in EconPapers)
Pages: 20 pages
Date: 2023
New Economics Papers: this item is included in nep-exp and nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:eve:wpaper:23-01

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