Ambiguity and conflict aversion in the field of insurance: insurers’ attitude to imprecise probabilities (original) (raw)

2003

Abstract

Information ambiguity and conflict are prevalent in insurance decision because experts may not agree on the probability of the risk. This research investigates insurance decision under either ambiguous and consensual or ambiguous and conflicting information about the probability of the risk. Seventy-eight professional insurers completed a questionnaire that contained two scenario: ”Pollution” and ”Earthquake”. The insurer is asked the premium he would charge to cover the risk in three situations: a risk with a precise probability, a risk with an ambiguous and consensual ambiguity and a risk with an ambiguous and conflicting ambiguity. First, the questionnaire provided evidence for ambiguity aversion but no comparative effect was found. Second, the effect of conflicting evidences was also contemplated. From a statistical point of view, conflicting information is not dispreferred to ambiguous and agreeing messages. However, many insurers mentionned disagreement as a source of greater ...

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