Propitious selection in insurance

✍ Scribed by David Hemenway

• Book ID: 104625102
• Publisher: Springer
• Year: 1992
• Tongue: English
• Weight: 247 KB
• Volume: 5
• Category: Article
• ISSN: 0895-5646
• DOI: 10.1007/bf00057881

✦ Synopsis

The theory of propitious selection suggests that there are risk-avoiding personalities who both take physical precautions and buy financial security (insurance). Conversely, there are risk seekers who tend to do neither. Survey evidence is presented that is consistent with the theory. Individuals who obtain motor vehicle liability coverage are less likely than others to drink-and-drive, and are more likely to engage in health-beneficial (risk-avoiding) behaviors. Propitious selection may be a general phenomenon promoting favorable selection in many real world insurance markets.