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Are compulsory insurance and self-insurance substitutes or complements? A matter of risk attitudes

Author

Listed:
  • François Pannequin

    (Ecole Normale Supérieure Paris-Saclay and CREST UMR 9194 CNRS)

  • Anne Corcos

    (CURAPP-ESS UMR 7319 CNRS and Université de Picardie Jules Verne)

Abstract

This article analyzes the effects of compulsory insurance on the demand for self-insurance. We show that although a risk lover invests neither in insurance nor in self-insurance when insurance is voluntary, she invests in self-insurance when insurance is compulsory. On the contrary, when insurance is mandatory, a risk averter would substitute self-insurance for insurance. Economic policy implications of these antagonistic effects on self-insurance are discussed.

Suggested Citation

  • François Pannequin & Anne Corcos, 2020. "Are compulsory insurance and self-insurance substitutes or complements? A matter of risk attitudes," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 45(1), pages 24-35, March.
    • Handle: RePEc:pal:genrir:v:45:y:2020:i:1:d:10.1057_s10713-019-00043-x
    DOI: 10.1057/s10713-019-00043-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Self-insurance; Compulsory insurance; Risk attitudes; Risk lovers;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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