Regulating Consumer Demand in Insurance Markets

In recent years, it has become increasingly clear that Expected Utility Theory (EUT) is a remarkably poor theory of how and why individuals purchase insurance. However, the normative implications of this conclusion have remained largely unexplored. This Article takes up this issue. It argues that many observed deviations from EUT are likely the result of mistakes, in the sense that consumers would act differently than they do if they possessed perfect information and cognitive resources. From this perspective, regulatory interventions designed to improve consumer decision-making about insurance are potentially desirable. At the same time, the Article argues that some deviations from EUT may actually reflect sophisticated consumer behavior. In some cases, seemingly puzzling insurance decisions may help consumers manage emotions such as anxiety, regret, and loss aversion, while in other cases they may represent valuable commitment strategies. Because consumers’ insurance decisions may reflect sophisticated, rather than mistaken, decision-making, regulatory interventions that limit consumer choice are normatively troubling. Given these conflicting explanations for EUT’s failure as a descriptive theory of consumer demand in insurance markets, the Article explores a spectrum of “Libertarian Paternalistic” regulatory interventions. It argues that regulatory strategies that aim to encourage presumptively welfare-maximizing insurance decisions without restricting individual choice represent a promising and normatively defensible opportunity for improving consumer behavior in insurance markets

Large-scale synchrony of gap dynamics and the distribution of understory tree species in maple-beech forests

Large-scale synchronous variations in community dynamics are well documented for a vast array of organisms, but are considerably less understood for forest trees. Because of temporal variations in canopy gap dynamics, forest communities—even old-growth ones—are never at equilibrium at the stand scale. This paucity of equilibrium may also be true at the regional scale. Our objectives were to determine (1) if nonequilibrium dynamics caused by temporal variations in the formation of canopy gaps are regionally synchronized, and (2) if spatiotemporal variations in canopy gap formation aVect the relative abundance of tree species in the understory. We examined these questions by analyzing variations in the suppression and release history of Acer saccharum Marsh. and Fagus grandifolia Ehrh. from 481 growth series of understory saplings taken from 34 mature stands. We observed that (1) the proportion of stems in release as a function of time exhibited a U-shaped pattern over the last 35 years, with the lowest levels occurring during 1975–1985, and that (2) the response to this in terms of species composition was that A. saccharum became more abundant at sites that had the highest proportion of stems in release during 1975–1985. We concluded that the understory dynamics, typically thought of as a stand-scale process, may be regionally synchronized

Towards A Universal Framework For Insurance Anti-Discrimination Laws

Discrimination in insurance is principally regulated at the state level. Surprisingly, there is a great deal of variation across coverage lines and policyholder characteristics in how and the extent to which risk classification by insurers is limited. Some statutes expressly permit insurers to consider certain characteristics, while other characteristics are forbidden or limited in various ways. What explains this variation across coverage lines and policyholder characteristics? Drawing on a unique, hand-collected data-set consisting of the laws regulating insurer risk classification in fifty-one U.S. jurisdictions, this Article argues that much of the variation in state-level regulation of risk classification can in fact be explained by focusing exclusively on three factors: (i) the predictive capacity of the characteristic in question; (ii) the extent of the adverse selection problem created if the characteristic is restricted; and (iii) the extent to which discrimination on the basis of the characteristic is considered illicit. The Article concludes by suggesting that this implicit conceptual framework, which is embedded in the pattern of general and specific insurance anti-discrimination laws that have been enacted by states across the country, sheds new light on the nearly-universal state prohibition against unfair discrimination by insurers

Understanding Insurance Antidiscrimination Laws

Insurance companies are in the business of discrimination. Insurers attempt to segregate insureds into separate risk pools based on their differences in risk profiles, first, so that they can charge different premiums to the different groups based on their risk and, second, to incentivize risk reduction by insureds. This is why we let insurers discriminate. There are, however, limits to the types of discrimination we will allow insurers to engage in. But what exactly are those limits and how are they justified? To answer these questions, this Article articulates the leading fairness and efficiency arguments for and against limiting insurers’ ability to discriminate in their underwriting; identifies on this basis a set of predictions as to what one would expect state antidiscrimination laws to look like; and evaluates some of those predictions against a unique handcollected dataset consisting of the laws regulating insurer risk classification in all 51 U.S. jurisdictions. Among our findings is that contrary to the conventional wisdom state insurance anti-discrimination laws vary a great deal, in substance and in the intensity of regulation, across lines of insurance, across policyholder characteristics, and across states. The Article also finds that, contrary to our predictions, a surprising number of jurisdictions do not have any laws restricting insurers’ ability to discriminate on the basis of race, national origin, or religion. It concludes by discussing whether this fact indicates that states have inadequately policed unfair discrimination in insurance or impacts the larger policy decision in this country to leave insurance anti-discrimination law to the states

Explaining Variation in Insurance Anti-Discrimination Laws

Discrimination in insurance underwriting is regulated at the state level. Surprisingly, there is a great deal of variation across jurisdictions in how and the extent to which risk classification by insurers is limited. Some states expressly permit insurers to consider certain characteristics, while other characteristics are forbidden or limited in various ways. What explains this variation across states? Drawing on a unique, hand-collected data-set consisting of the laws regulating insurer risk classification in all 51 U.S. jurisdictions, this Article argues that much of the variation in state-level regulation of risk classification can in fact be explained by focusing exclusively on three factors: the predictive capacity of the characteristic in question, the extent of the adverse selection problem created if the characteristic is restricted, and the extent to which the characteristic is considered a socially suspect classification

General insurance marketing: a review and future research agenda

The financial services sector is a huge and diverse industry comprising many different forms of organisations and product offerings. Yet, a review of past papers in the Journal of Financial Services Marketing (JFSM) reveals a heavy bias towards articles on banking, to the neglect of other equally important financial services categories. The purpose of this paper is to address this imbalance and to call for more research to be conducted in a wider range of financial services categories. In particular, general insurance is singled out as a category worthy of further research. Looking to the past, this paper reviews research published to-date on general insurance in the JFSM to establish a benchmark and explore theoretical contributions. Attention is then turned to the future to identify a research agenda for the general insurance sector going forward. 5 important themes are identified: trust, transparency and simplification, technology, HNW and Takaful