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Labor Income Risk and Car Insurance in the UK

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  • Winfried Koeniger

Abstract

Microeconomic theory shows that only under certain conditions higher background risk increases the propensity to insure against independent marketable risks. We provide empirical evidence for the case of labor income risk and car insurance in the UK. The main result is that households with higher labor income risk spend more on insurance. This finding is consistent with microeconomic theory if the utility function is of the HARA type. Moreover, we find that households spend more on insurance if they participate in the stock market.

Suggested Citation

  • Winfried Koeniger, 2004. "Labor Income Risk and Car Insurance in the UK," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 29(1), pages 55-74, June.
    • Handle: RePEc:kap:geneva:v:29:y:2004:i:1:p:55-74
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    Cited by:

    1. Winfried Koeniger & Giuseppe Bertola, 2004. "Consumption Smoothing and the Structure of Labor and Credit Markets," 2004 Meeting Papers 263, Society for Economic Dynamics.
    2. Bertola, Giuseppe & Koeniger, Winfried, 2006. "Consumption smoothing and liquidity income redistribution," CFS Working Paper Series 2006/34, Center for Financial Studies (CFS).
    3. Giuseppe Bertola, 2007. "Finance and Welfare States in Globalising Markets," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Jeremy Lawson (ed.),The Structure and Resilience of the Financial System, Reserve Bank of Australia.
    4. Ortega, Eva-María & Escudero, Laureano F., 2010. "On expected utility for financial insurance portfolios with stochastic dependencies," European Journal of Operational Research, Elsevier, vol. 200(1), pages 181-186, January.
    5. Aney, Madhav S. & Ho, Christine, 2019. "Deadlier road accidents? Traffic safety regulations and heterogeneous motorists’ behavior," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 155-171.
    6. Bertola, Giuseppe & Koeniger, Winfried, 2007. "Consumption smoothing and income redistribution," European Economic Review, Elsevier, vol. 51(8), pages 1941-1958, November.

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