The Impact of Uncertainty in Insurance Claim on Insurance Demand

Key Points

• The aim is to analyze how uncertainty in insurance payouts influences individual insurance demand.
• Theoretical analysis of insurance demand under uncertainty.
• Exploration of factors affecting insurance payout certainty, including exclusions and company bankruptcy.
• Examination of how different insurance premium structures influence demand under these uncertainties.
• Uncertainty in payouts decreases insurance demand.
• The effect of payout uncertainty varies with additional premium costs and the set payout amounts.
• The study suggests that traditional theories regarding insurance as an inferior good may not hold in the context of payout uncertainty.