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Risk management in everyday insurance decisions: evidence from a process tracing study

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  • WILLIAMSON, JANIS
  • RANYARD, ROB
  • CUTHBERT, LISA

Abstract

This study examined the applicability of Huber's (1997) model of risk management to a real-world consumer insurance decision, namely whether to insure a recently purchased item against possible mechanical breakdown in the future. Huber argued that decision makers manage the risks of negative outcomes by applying one or more defusing operators. Respondents in this study asked for whatever information they felt necessary to decide whether to take out an extended warranty on two consumer products of differing values. We found support for most aspects of the model, particularly in relation to risk defusing operators, but also identified some respondents who could not easily be accommodated within it, i.e. those who perceived risk, but did not seem prepared to take any action. We also found evidence for recognition primed insurance decisions. The results are interpreted from a bounded rationality perspective.

Suggested Citation

  • Williamson, Janis & Ranyard, Rob & Cuthbert, Lisa, 2000. "Risk management in everyday insurance decisions: evidence from a process tracing study," Risk, Decision and Policy, Cambridge University Press, vol. 5(1), pages 19-38, April.
    • Handle: RePEc:cup:rdepol:v:5:y:2000:i:01:p:19-38_00
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    Cited by:

    1. Ranyard, Rob & Hinkley, Lisa & Williamson, Janis & McHugh, Sandie, 2006. "The role of mental accounting in consumer credit decision processes," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 571-588, August.
    2. Ranyard, Rob & McHugh, Sandie, 2012. "Defusing the risk of borrowing: The psychology of payment protection insurance decisions," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 738-748.
    3. Marieke Huysentruyt & Daniel Read, 2008. "How do people value extended warranties?: Evidence from two field surveys," Working Papers 2008_02, Durham University Business School.
    4. Marieke Huysentruyt & Daniel Read, 2010. "How do people value extended warranties? Evidence from two field surveys," Journal of Risk and Uncertainty, Springer, vol. 40(3), pages 197-218, June.
    5. Rob Ranyard & Sandie McHugh, 2012. "Bounded rationality in credit consumers' payment protection insurance decisions: the effect of relative cost and level of cover," Journal of Risk Research, Taylor & Francis Journals, vol. 15(8), pages 937-950, September.
    6. Pranav Jindal, 2015. "Risk Preferences and Demand Drivers of Extended Warranties," Marketing Science, INFORMS, vol. 34(1), pages 39-58, January.

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