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Mental Accounting, Access Motives, and Overinsurance

Markus Fels

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: Consumers frequently overinsure modest risks. I argue that confining consumers' insurance motives to a single motive - risk aversion - is responsible for the difficulty to rationalize this behavior. People who perform mental accounting have an additional motive for buying insurance. They perceive a risk of having insufficient means to self-insure. This complements behavioral approaches to explain the profitability of warranties and the dislike of deductibles. It accounts for several empirical regularities that are difficult to reconcile within existing models. Finally, it suggests that the way in which an insurer pays benefits influences the value and the cost of insurance.

JEL-codes: D11 D14 D81 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ias and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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Related works:
Journal Article: Mental Accounting, Access Motives, and Overinsurance (2020) Downloads
Working Paper: Mental accounting, access motives, and overinsurance (2015) Downloads
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