Related Experiment Video
Updated: Oct 11, 2025
13:04
Measuring the Subjective Value of Risky and Ambiguous Options using Experimental Economics and Functional MRI Methods
Published on: September 19, 2012
12.2K
Insurance decisions under nonperformance risk and ambiguity
Timo R Lambregts1,2, Paul van Bruggen3, Han Bleichrodt4,5
1Erasmus School of Health Policy & Management, Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3062 PA Rotterdam, Netherlands.
Journal of Risk and Uncertainty
|December 6, 2021
Summary
People underinsure against future risks due to uncertainty about non-reimbursement. This study shows insurance demand decreases when nonperformance risk is ambiguous, especially for risk-prudent individuals.
Area of Science:
- Behavioral economics
- Decision theory
- Risk management
Background:
- Societal underinsurance against low-probability, long-term risks is a significant issue.
- Uncertainty regarding risk non-reimbursement may deter individuals from purchasing adequate insurance.
- Ambiguity aversion and risk prudence are potential factors influencing insurance decisions.
Purpose of the Study:
- To experimentally investigate the impact of ambiguity in non-reimbursement risk on insurance demand.
- To test the hypothesis that ambiguity aversion and risk prudence lead to reduced insurance uptake.
- To explore the relationship between decision-maker characteristics and insurance purchasing behavior under uncertainty.
Main Methods:
- An insurance experiment was designed to compare insurance demand under known versus ambiguous nonperformance risks.
- Participants' decision-making behavior was observed in controlled experimental conditions.
- Statistical analysis was employed to evaluate the effect of risk ambiguity and individual risk attitudes on insurance take-up.
Main Results:
- Insurance demand was significantly lower when the nonperformance risk was ambiguous compared to when it was known.
- This reduction in demand was particularly pronounced among decision-makers identified as risk prudent.
- The study's measure of ambiguity aversion did not fully explain the observed decrease in insurance take-up.
Conclusions:
- Ambiguity surrounding non-reimbursement risk demonstrably reduces insurance demand, especially for risk-prudent individuals.
- The findings support the role of ambiguity in suboptimal insurance decisions for future or unlikely risks.
- Further research is needed to capture the multifaceted nature of ambiguity attitudes beyond simple aversion.
Related Concept Videos
01:23Types of Biopharmaceutical Studies: Controlled and Non-Controlled Approaches
197
Biopharmaceutical studies constitute a vital field aiming to enhance drug delivery methods and refine therapeutic approaches, drawing upon diverse interdisciplinary knowledge. In research methodologies, the choice between controlled and non-controlled studies significantly influences the study's reliability and accuracy.
Non-controlled studies, commonly employed for initial exploration, lack a control group, rendering them susceptible to biases and external influences. In contrast,...
Non-controlled studies, commonly employed for initial exploration, lack a control group, rendering them susceptible to biases and external influences. In contrast,...
197
01:20Decision Making
305
Decision-making is a fundamental cognitive process that involves evaluating alternatives and selecting among them. This process can range from simple choices, such as deciding what to wear, to complex decisions, like choosing a major in college or a career path. The complexity of the decision often dictates the approach we use, which can be broadly categorized into two types: automatic and controlled decision-making.
Automatic decision-making is fast, intuitive, and relies on gut feelings...
Automatic decision-making is fast, intuitive, and relies on gut feelings...
305
01:09Decision Making: P-value Method
5.8K
The process of hypothesis testing based on the P-value method includes calculating the P- value using the sample data and interpreting it.
First, a specific claim about the population parameter is proposed. The claim is based on the research question and is stated in a simple form. Further, an opposing statement to the claim is also stated. These statements can act as null and alternative hypotheses: a null hypothesis would be a neutral statement while the alternative hypothesis can...
First, a specific claim about the population parameter is proposed. The claim is based on the research question and is stated in a simple form. Further, an opposing statement to the claim is also stated. These statements can act as null and alternative hypotheses: a null hypothesis would be a neutral statement while the alternative hypothesis can...
5.8K
01:30Ethical Dilemmas II
1.5K
Resolving an ethical dilemma in healthcare involves a systematic approach that considers every aspect of the issue, respecting both the patient's needs and values and the healthcare professional's ethical obligations. Here are potential steps to resolve an ethical dilemma:
1.5K
01:14Errors In Hypothesis Tests
4.8K
When performing a hypothesis test, there are four possible outcomes depending on the actual truth (or falseness) of the null hypothesis and the decision to reject or not.
4.8K
01:20Actuarial Approach
150
The actuarial approach, a statistical method originally developed for life insurance risk assessment, is widely used to calculate survival rates in clinical and population studies. This method accounts for participants lost to follow-up or those who die from causes unrelated to the study, ensuring a more accurate representation of survival probabilities.
Consider the example of a high-risk surgical procedure with significant early-stage mortality. A two-year clinical study is conducted,...
Consider the example of a high-risk surgical procedure with significant early-stage mortality. A two-year clinical study is conducted,...
150