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Risk attitudes and private disability insurance holdings

Author

Listed:
  • Christos I. Giannikos

    (Baruch College and Graduate Center, City University of New York)

  • Andreas Kakolyris

    (Kean University)

  • Tin Shan Suen

    (Kean University)

Abstract

This study identifies several factors that affect the demand for disability insurance (DI), such as wealth, health, financial literacy, and self-reported willingness to take financial risks, using a logit model and a random forest algorithm. While the role of risk aversion in insurance ownership is well established within theoretical insurance models, the empirical literature is still inconclusive. We provide evidence based on the Survey of Consumer Finances that willingness to take financial risks similar to wealth, health, and financial literacy is positively associated with the ownership of private DI. Furthermore, the literature has not explored multivariate risk attitudes in this framework. We thus employ indices of multivariate risk attitudes within a theoretical DI model. Our empirical results on private DI, in conjunction with the theoretical model we present, allow us to test hypotheses regarding multivariate household preferences and reject the hypothesis of correlation-neutral preferences on wealth and health.

Suggested Citation

  • Christos I. Giannikos & Andreas Kakolyris & Tin Shan Suen, 2025. "Risk attitudes and private disability insurance holdings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(1), pages 23-44, March.
    • Handle: RePEc:spr:jecfin:v:49:y:2025:i:1:d:10.1007_s12197-024-09689-4
    DOI: 10.1007/s12197-024-09689-4
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    More about this item

    Keywords

    Disability Insurance; Risk Tolerance; Financial Literacy; Multivariate risk attitudes; Random forest algorithm; Underinsurance; Index of Cross-Prudence in Health;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • I1 - Health, Education, and Welfare - - Health
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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