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Propitious Selection in Insurance

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  • Hemenway, David

Abstract

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. Copyright 1992 by Kluwer Academic Publishers

Suggested Citation

  • Hemenway, David, 1992. "Propitious Selection in Insurance," Journal of Risk and Uncertainty, Springer, vol. 5(3), pages 247-251, July.
    • Handle: RePEc:kap:jrisku:v:5:y:1992:i:3:p:247-51
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    Citations

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    Cited by:

    1. De Donder, Philippe & Hindriks, Jean, 2006. "Does Propitious Selection Explain Why Riskier People Buy Less Insurance?," CEPR Discussion Papers 5640, C.E.P.R. Discussion Papers.
    2. Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, April.
    3. Tianxu Chen, 2019. "Can Health Savings Account Reduce Health Spending?: Evidence from China," Working papers 2019-08, University of Connecticut, Department of Economics.
    4. Bruno Jullien & Bernard Salanié & François Salanié, 2000. "Screening Risk-Averse Agents Under Moral Hazard," Working Papers 2000-41, Center for Research in Economics and Statistics.
    5. Philippe Donder & Jean Hindriks, 2009. "Adverse selection, moral hazard and propitious selection," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 73-86, February.
    6. Laure B. de Preux, 2011. "Anticipatory ex ante moral hazard and the effect of medicare on prevention," Health Economics, John Wiley & Sons, Ltd., vol. 20(9), pages 1056-1072, September.
    7. Christopher S. Armstrong & David F. Larcker & Che-Lin Su, 2010. "Endogenous Selection and Moral Hazard in Compensation Contracts," Operations Research, INFORMS, vol. 58(4-part-2), pages 1090-1106, August.
    8. Philippe De Donder & Marie-Louise Leroux & François Salanié, 2022. "Advantageous selection without moral hazard (with an application to life care annuities)," CIRANO Working Papers 2022s-13, CIRANO.
    9. Nick Netzer & Florian Scheuer, 2010. "Competitive screening in insurance markets with endogenous wealth heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 187-211, August.
    10. Dorothy Robyn & Katherine Swartz, 1993. "Insights," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(2), pages 359-363.
    11. Philippe De Donder & Marie-Louise Leroux & François Salanié, 2023. "Advantageous selection without moral hazard," Journal of Risk and Uncertainty, Springer, vol. 67(1), pages 21-43, August.
    12. Karl Ove Aarbu, 2017. "Asymmetric Information in the Home Insurance Market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(1), pages 35-72, March.
    13. Clifford Afoakwah & Joshua Byrnes & Paul Scuffham & Son Nghiem, 2023. "Testing for selection bias and moral hazard in private health insurance: Evidence from a mixed public‐private health system," Health Economics, John Wiley & Sons, Ltd., vol. 32(1), pages 3-24, January.
    14. Casey Rothschild & Paul D. Thistle, 2022. "Supply, demand, and selection in insurance markets: Theory and applications in pictures," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(4), pages 419-444, December.
    15. Cristina OTTAVIANI & Daniela VANDONE, 2011. "Decision-making under uncertainty and demand for insurance: an empirical study," Departmental Working Papers 2011-05, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    16. Dionne, Georges & Fombaron, Nathalie & Doherty, Neil, 2012. "Adverse selection in insurance contracting," Working Papers 12-8, HEC Montreal, Canada Research Chair in Risk Management.
    17. Bruno Jullien & Bernard Salanié & François Salanié, 2007. "Screening risk-averse agents under moral hazard: single-crossing and the CARA case," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 151-169, January.
    18. Buchmueller, Thomas C. & Fiebig, Denzil G. & Jones, Glenn & Savage, Elizabeth, 2013. "Preference heterogeneity and selection in private health insurance: The case of Australia," Journal of Health Economics, Elsevier, vol. 32(5), pages 757-767.

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