Rudiments of insurance purchasing: a graphical state-claims analysis (original) (raw)

The Complexity of the Insurance Purchase Decision Making Process

Transformations in Business and Economics

Reaping the benefits of the rapid growth of the insurance markets, in particular in Asia, calls for improving the understanding of their respective consumers' expectations and behaviours. This paper presents an approach for modelling and analysing how consumers form their purchase decision for insurance services. Building upon fragmented insurance consumer behaviour works, we propose a model that consolidates and expands the current state-of-the-art. This model includes various consumers' characteristics such as life quality, exposure to risks, insurance culture and family nest filters, consumers' "intelligence", perception of need for security, need for insurance and affordability. Combined together, they model the consumers' inclination towards purchasing insurance. This is followed by a price-quality trade-off filter that leads to the specific product purchase decision; moreover, we propose a scheme that reflects the complexity of the selection process. ...

Insurance Pricing: from theory to reality

2010

Risk is an inevitable part of the world that can be found in different forms around us. We may be able to control the negative effect of some risks. But, insurance is an appropriate method that can be used for treating many different types of risks. Insurance pricing is a pivot in insurance industry as it is associated to all stakeholders. Insured, insurers and other stakeholders of the insurance industry follow up insurance pricing carefully. However, in most cases, the insurers implement insurance pricing. The price of insurance is normally a function of the cost of production. Unlike of many products, the costs of insurance products are not fixed and depend on a range of factors. In this paper, I have investigated the mechanisms by which these factors associate with insurance pricing. Then, I tried to identify drawbacks of these mechanisms.

Insurance and Insurance Markets

Handbook of the Economics of Risk and Uncertainty, 2014

Kenneth Arrow and Karl Borch published several important articles in the early 1960s that can be viewed as the beginning of modern economic analysis of insurance activity. This chapter reviews the main theoretical and empirical contributions in insurance economics since that time. The review begins with the role of utility, risk, and risk aversion in the insurance literature and then summarizes work on the demand for insurance, insurance and resource allocation, moral hazard, and adverse selection. It then turns to financial pricing models of insurance and to analyses of price volatility and underwriting cycles; insurance price regulation; insurance company capital adequacy and capital regulation; the development of insurance securitization and insurancelinked securities; and the efficiency, distribution, organizational form, and governance of insurance organizations.

Studying the Factors Which Influence Consumer Behavior on the Insurance Market

Ovidius University Annals, …, 2010

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Decision making under risk: applications to insurance purchasing

Advances in Consumer Research, 1992

The purpose of this paper is to provide an overview of psychological research on decision making under risk, with an emphasis on insurance behavior. This research approach has supplied many insights into how humans react to risk and uncertainty. These insights may help explain why people buy insurance in some circumstances and not others. For instance, decision research has shown that humans:

An Insurance Market Simulation With Both Adverse and Advantageous Selection

Risk management and insurance review, 2017

The theory of adverse selection predicts that high-risk individuals are more likely to buy insurance than low-risk individuals if asymmetric information regarding individuals' risk type is present in the market. The theory of advantageous selection predicts the opposite-a negative relationship between insurance coverage and risk type can be obtained when hidden knowledge in other dimensions (e.g., the degree of risk aversion) is present in addition to the risk type. Using the heterogeneity of insurance buyers in either risk type or risk aversion, we first introduce a classroom-based insurance market simulation game to show that adverse selection and advantageous selection can coexist. We then explain the underlying concepts using two methods: a mathematical framework based on expected utility theory and an empirical framework based on the results of the game itself. The game is easy to implement, reinforces textbook concepts by providing students a hands-on experience, and supplements current textbooks by bringing their content up to date with current research.

Choice of purchasing arrangements in insurance markets

Journal of Risk and Uncertainty, 1989

A simple dynamic model helps explain why risk-pooling purchasing arrangements evolved for health, disability, and term life insurance but not for property, automobile, or homeowners' insurance, and why whole-life policies typify life insurance purchased on an individual basis. We show that riskpooling purchases facilitate insurance against unpredictable changes in one's risk type, but such contracts prevail in competitive equilibrium only when the loss probabilities increase with age, as they do for health, disability, and life insurance. In contrast, when the loss probability declines with age (as it does for automobile insurance), then competitive equilibrium entails separating insurance contracts.

Usage-Based Insurance: the concept and study of available analyses

2017

Although insurance telematics may be a source of competitive advantage, the Usage-Based Insurance (UBI) is still an insufficiently explored area, especially in the context of the Polish insurance market. Accordingly, the main purpose of this paper is to facilitate a better understanding of the topic through a review and summary of selected literature and research achievements, which may prove useful in a discussion about domestic UBI. The paper presents both the historical perspective of UBI development and a summary of the research carried out over the last decade. It discusses the advancement of UBI tariffs and the successful modification of the applicable pricing schemes as well as points to issues that may hinder the market launch of Usage-Based Insurance. Finally, it attempts to present a structured view of definitions of various terms associated with telematics-based insurance.