Studies from Erasmus University Yield New Data on Risk Management (A Behavioral Decomposition of Willingness To Pay for Health Insurance): Risk Management

2022 APR 19 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- A new study on Risk Management is now available. According to news reporting originating in Rotterdam, Netherlands, by NewsRx journalists, research stated, “Despite widespread exposure to substantial medical expenditure risk in low-income populations, health insurance enrollment is typically low. This is puzzling from the perspective of expected utility theory.”

Financial supporters for this research include The World Bank India, Netherlands Organization for Scientific Research (NWO), Swiss Agency for Development and Cooperation/National Science Foundation Programme for Research on Global Issues for Development through the grant, “Inclusive social protection for chronic health problems.”

The news reporters obtained a quote from the research from Erasmus University, “To help explain it, this paper introduces a decomposition of the stated willingness to pay (WTP) for insurance into its fair price and three behavioral deviations from that price due to risk perception and risk attitude consistent with prospect theory, plus a residual. To apply this approach, we elicit WTP, subjective distributions of medical expenditures and risk attitude (utility curvature and probability weighting) from Filipino households in a nationwide survey. We find that the mean stated WTP of the uninsured is less than both the actuarially fair price and the subsidized price at which public insurance is offered. This is not explained by downwardly biased beliefs: both the mean and the median subjective expectation are greater than the subsidized price. Convex utility in the domain of losses pushes mean WTP below the fair price and the subsidized price, and the transformation of probabilities into decision weights depresses the mean further, at least using one of two specific decompositions.”

According to the news reporters, the research concluded: “WTP is reduced further by factors other than risk perception and attitude.”

This research has been peer-reviewed.

For more information on this research see: A Behavioral Decomposition of Willingness To Pay for Health Insurance. Journal of Risk and Uncertainty, 2022. Journal of Risk and Uncertainty can be contacted at: Springer, Van Godewijckstraat 30, 3311 Gz Dordrecht, Netherlands. (Springer - www.springer.com; Journal of Risk and Uncertainty - http://www.springerlink.com/content/0895-5646/)

Our news correspondents report that additional information may be obtained by contacting Aurelien Baillon, Erasmus University, Erasmus School of Economics, Rotterdam, Netherlands. Additional authors for this research include Owen O’Donnell, Aleli Kraft and Kim van Wilgenburg.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1007/s11166-022-09371-2. 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.

(Our reports deliver fact-based news of research and discoveries from around the world.)