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Negligence, Ignorance and the Demand for Liability Insurance

Author

Listed:
  • Vickie Bajtelsmit

    (Department of Finance and Real Estate, Colorado State University, Ft. Collins, CO 80523, USA.)

  • Paul Thistle

    (Department of Finance, University of Nevada Las Vegas, Las Vegas, NV 89154, USA.)

Abstract

This paper considers whether lack of information regarding risk exposures can lead to a demand for negligence liability insurance. We find that, under the uniform negligence rule, such as the “reasonable person” standard used to determine negligence in the U.S. and other countries, the value of information is positive and any demand for liability insurance must come from informed individuals. The necessary and sufficient condition is that good risks find it less costly to be negligent and purchase insurance.

Suggested Citation

  • Vickie Bajtelsmit & Paul Thistle, 2009. "Negligence, Ignorance and the Demand for Liability Insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 34(2), pages 105-116, December.
    • Handle: RePEc:pal:genrir:v:34:y:2009:i:2:p:105-116
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    Cited by:

    1. Alice Guerra & Tobias M. Hlobil, 2018. "Tailoring Negligence Standards to Accident Records," The Journal of Legal Studies, University of Chicago Press, vol. 47(2), pages 325-348.
    2. Goeschl, Timo & Pfrommer, Tobias, 2015. "Learning by Negligence - Torts, Experimentation, and the Value of Information," Working Papers 0598, University of Heidelberg, Department of Economics.
    3. Vickie Bajtelsmit & Jennifer Coats & Paul Thistle, 2015. "The effect of ambiguity on risk management choices: An experimental study," Journal of Risk and Uncertainty, Springer, vol. 50(3), pages 249-280, June.
    4. J François Outreville, 2010. "The Geneva Risk and Insurance Review 2009: In Quest of Behavioural Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(3), pages 484-497, July.

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