The Law of Large (Small?) Numbers and the Demand for Insurance

The Law of Large (Small?) Numbers and the Demand for Insurance

Using an expected utility approach the effect of "risk subdividing" on insurance demand is analyzed. The results indicate that when the total property at risk is scattered only on a small number of pieces (with independent risks), risk retention becomes very attractive relatively to market...

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Veröffentlicht in:The Journal of risk and insurance 1991-09, Vol.58 (3), p.438-451
Hauptverfasser: Eeckhoudt, L., Bauwens, L., Briys, E., Scarmure, P.
Format: Artikel
Sprache:eng
Schlagworte:
Demand
Diversification
Economic models
Economic theory
Employee insurance
Expected utility
Insurance
Insurance coverage
Insurance markets
Insurance premiums
Property & casualty insurance
Property insurance
Risk aversion
Risk management
Self insurance
Studies
Utility functions
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Beschreibung
Zusammenfassung:Using an expected utility approach the effect of "risk subdividing" on insurance demand is analyzed. The results indicate that when the total property at risk is scattered only on a small number of pieces (with independent risks), risk retention becomes very attractive relatively to market insurance with a positive loading.
ISSN:0022-4367
1539-6975
DOI:10.2307/253401