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Tuesday, August 3 • 9:00am - 10:30am
3C1 Why People Buy Insurance: A Modern Answer to an Old Question

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Markus Fels, TU Dortmund

I revisit the question of which motive underlies insurance demand. I draw on the literature of state-dependent utility and on the literature of imperfectly divisible consumption to argue that the general purpose of insurance is not a risk transfer, but meeting a conditional need. In this way, insurance aligns the risk in one’s financial endowment with the risk in one’s financial needs. I discuss how this understanding of insurance extends the traditional view of insurance and I show how this extension has implications for our discipline’s research agenda and policy advice.


Kyungsun Kim

Institute of Finance and Banking, Seoul National University

avatar for Markus Fels

Markus Fels

IfM Bonn

Tuesday August 3, 2021 9:00am - 10:30am EDT