Report Summarizes Economic Behavior and Organization Study Findings from Renmin University of China (Optimal Insurance Design Under Narrow Framing)

2021 FEB 26 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Current study results on Economics - Economic Behavior and Organization have been published. According to news reporting out of Beijing, People’s Republic of China, by NewsRx editors, the research stated, “In this paper, we study insurance decisions when the policyholder evaluates insurance with narrow framing. We show that due to aversion to risk on the net insurance payoff, i.e., insurance indemnity minus insurance premium, narrow framing reduces insurance demand.”

Financial support for this research came from Jean-Jacque Laffont Fondation at the Toulouse School of Economics.

Our news journalists obtained a quote from the research from the Renmin University of China, “This helps explaining the observed low insurance demand in many insurance markets. We also show that the optimal insurance contract involves a deductible and the coinsurance of losses above the deductible when transaction costs depend on the actuarial value of the policy.”

According to the news editors, the research concluded: “Moreover, when the policyholder is loss averse over the net insurance payoff, a fixed indemnity equal to insurance premium should be paid for a range of intermediate losses.”

This research has been peer-reviewed.

For more information on this research see: Optimal Insurance Design Under Narrow Framing. Journal of Economic Behavior & Organization, 2020;180:596-607. Journal of Economic Behavior & Organization can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Economic Behavior & Organization - http://www.journals.elsevier.com/journal-of-economic-behavior-and-organization/)

Our news journalists report that additional information may be obtained by contacting Jiakun Zheng, Renmin University of China, School of Finance, 59 Zhongguancun St, Beijing 100872, People’s Republic of China.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jebo.2020.05.020. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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