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Journal of Risk and Uncertainty

, Volume 5, Issue 3, pp 247–251 | Cite as

Propitious selection in insurance

  • David Hemenway
Article

Abstract

The theory of propitious selection suggests that there are risk-avoiding personalities who both take physical precautions and buy financial security (insurance). Conversely, there are risk seekers who tend to do neither. Survey evidence is presented that is consistent with the theory. Individuals who obtain motor vehicle liability coverage are less likely than others to drink-and-drive, and are more likely to engage in health-beneficial (risk-avoiding) behaviors. Propitious selection may be a general phenomenon promoting favorable selection in many real world insurance markets.

Key words

insurance automobile insurance risk moral hazard adverse selection 

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References

  1. All Industry Research Advisory Council. (1989).Uninsured Motorists. Oak Brook, IL: AIRAC.Google Scholar
  2. Greene, Mark. (1963). “Attitudes Toward Risk and a Theory of Insurance Competition”,Journal of Insurance 30, 165–182.Google Scholar
  3. Hemenway, David. (1990). “Propitious Selection”.Quarterly Journal of Economics 105, 1063–1069.Google Scholar
  4. PAM. (1985; 1988).Public Attitude Monitor. Annual Survey by the Roper Organization for the All-Industry Research Advisory Council. Oak Brook, IL.: AIRACGoogle Scholar

Copyright information

© Kluwer Academic Publishers 1992

Authors and Affiliations

  • David Hemenway
    • 1
  1. 1.Harvard School of Public HealthBoston

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