Risk Aversion in the Theory of Life Insurance: The Fisherian Model

This study aims to examine the factors that influence consumer purchase intention towards life insurance. The study included religiosity, risk aversion motives, saving motives, and financial literacy with classical Theory of Reasoned Action (TRA), therefore extending the model. A convenience sampling method was employed to collect data from 315 respondents working in different public and private institutions in Bangladesh. Collected data were analysed using the structural equation model (SEM). The results revealed that attitude, subjective norms, risk aversion motives, saving motives, and financial literacy have a significant positive impact on consumer purchase intention towards life insurance. Moreover, religiosity was found to have a negative impact on purchase intention. In addition, saving motives was found as a mediator in the relationship between risk aversion motives and purchase intention, as well as between financial literacy and purchase intention. Since attitude and subjective norms were found to have the most effect on purchase intention, the study implicated that marketers should emphasise company image, reputation, and the credibility of the agents, together with the significant others to whom we often turn to before making any financial decision. Finally, the study offered directions for further research after divulging several limitations.

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Utility-Consistent Valuation Schemes for the Own Risk and Solvency Assessment of Life Insurance Companies

Asia-Pacific Journal of Risk and Insurance ◽

10.1515/apjri-2019-0047 ◽

2020 ◽

Vol 0 (0) ◽

Cited By ~ 1

Author(s):

Olivier Le Courtois ◽

Mohamed Majri ◽

Li Shen

Keyword(s):

Risk Aversion ◽

Prospect Theory ◽

Life Insurance ◽

Absolute Risk ◽

Expected Utility Theory ◽

Cumulative Prospect Theory ◽

Model Complexity ◽

Insurance Companies ◽

A Value ◽

Solvency Assessment

AbstractIn this paper, we construct new valuation schemes for the liabilities and economic capital of insurance companies. Specifically, we first build a ‘SAHARA’ valuation framework based on Symmetric Asymptotic Hyperbolic Absolute Risk Aversion utility functions. Then, we construct a ‘SAHARA-CPT’ framework that incorporates the previous utility function as a value function and that is based on Cumulative Prospect Theory. The process used for assessing a life insurance company’s own funds consists in replacing the market-consistent parametrization with a utility-consistent parametrization that accounts for the risk aversion of the market and the long-term duration of the company’s commitments. Our illustrations show that this approach leads to a lower value of the Own Risk and Solvency Assessment and to a lower volatility of own funds. The framework that is based on cumulative prospect theory has the advantage over the expected utility theory framework that it considers a precautionary overweighting of extreme events, as a tradeoff for additional model complexity.

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OPTIMAL CONSUMPTION, PORTFOLIO, AND LIFE INSURANCE WITH BORROWING CONSTRAINT AND RISK AVERSION CHANGE

Journal of the Chungcheng Mathematical Society ◽

10.14403/jcms.2016.29.2.375 ◽

2016 ◽

Vol 29 (2) ◽

pp. 375-383

Author(s):

Ho-Seok Lee

Keyword(s):

Risk Aversion ◽

Life Insurance ◽

Optimal Consumption ◽

Borrowing Constraint

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Does financial literacy make the difference in non-life insurance demand among European countries?

Ekonomski pregled ◽

10.32910/ep.71.4.3 ◽

2020 ◽

Vol 71 (4) ◽

pp. 359-382

Author(s):

Marijana Ćurak ◽

Sandra Pepur ◽

Dujam Kovač

Keyword(s):

Risk Aversion ◽

Life Insurance ◽

Financial Literacy ◽

Panel Data Analysis ◽

European Countries ◽

General Level ◽

Insurance Demand ◽

Life Insurance Demand ◽

The Difference ◽

The Impact

While risk aversion and affordability of insurance are considered as the most important determinants of non-life insurance demand, understanding and knowledge of complex non-life insurance products are less researched. Studies on insurance demand conducted at the cross-section level, which include education, usually use it as a proxy for risk aversion and to a limited extent as a measure of financial literacy. Moreover, the general level of education does not accurately reflect the level of understanding of sophisticated insurance instruments. Consequently, the main aim of this research is to analyse the impact of financial literacy on the demand for non-life insurance by applying a more precise measure of financial literacy. The empirical analysis is based on the dataset of 38 European countries in the period from 2010 to 2016 and is done using the panel data analysis technique. Research findings confirm that financial literacy makes the difference in non-life insurance demand among European countries, while controlling for other economic, social/cultural, market structure and institutional determinants of non-life insurance demand. The paper contributes to the literature on non-life insurance demand, especially the one on the relationship between financial literacy and the demand for non-life insurance.

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