Framing and insurance choices

The presentation of objective information should not affect a rational decision‐maker; however, in practice, it often does. This paper studies the effect of the framing of contingencies on insurance choices. In several experiments, we presented participants with differently framed insurance tasks, where they had to choose deductibles against two different types of losses. The treatment group received a broad description of the risky situation and was asked to decide on the deductibles jointly, whereas the control group received a narrow description of the same task and was asked to decide on the deductibles separately. We discovered that the distribution of the insurance premium paid was identical in all groups, but the actual choices of the insurance plans were significantly diverse: On average, the treatment group preferred more similar deductibles than did the control group. These results indicate the importance of framing in insurance decision‐making.