Can waste aversion affect demand for insurance? Evidence from experiment and survey

Evidence shows that people are discouraged from buying fair insurance by the thought that if they do not suffer a loss, they will have wasted their money. We extend this theory to test if waste aversion could lead to a reduction in the amount of coverage sought. We deploy a multimethod design wherein we first run incentive-compatible experiments to establish a cause-and-effect relationship. We follow it up with a survey rolled out to actual buyers of insurance to generate external validity for our results. Our findings show that waste averters demand lesser insurance coverage than non-waste averters. (c) 2022 Published by Elsevier B.V.

Automated summary

This study examines how waste aversion can impact insurance purchase behavior. The findings suggest that individuals who are averse to waste tend to seek less insurance coverage compared to those who are not.