Abstract
There is increasing empirical evidence that one reason the insurance industry has been reluctant to cover a number of risks is the ambiguity or uncertainty associated with either the probability of specific events occurring or the magnitude of their potential consequences or both.
This paper briefly reviews the literature on ambiguity as it relates to decision making under uncertainty and indicates why it creates theoretical challenges. Empirical evidence is then presented on the importance of ambiguity on the insurance premium setting process based on recently completed national surveys of both actuaries and undewriters. At a prescriptive level the paper explores whether new institutional arrangements are required to replace traditional insurance mechanisms for providing protection that is currently unavailable.
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© 1992 Springer Science+Business Media New York
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Kunreuther, H., Hogarth, R.M. (1992). How does Ambiguity Affect Insurance Decisions?. In: Dionne, G. (eds) Contributions to Insurance Economics. Huebner International Series on Risk, Insurance and Economic Security, vol 13. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1168-5_12
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DOI: https://doi.org/10.1007/978-94-017-1168-5_12
Publisher Name: Springer, Dordrecht
Print ISBN: 978-90-481-5788-4
Online ISBN: 978-94-017-1168-5
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