The Law of Large (small) Numbers and the Demand for Insurance

Eeckhoudt, Louis;Bauwens, Luc;Briys, E.;Scarmure, P.
(1991) Journal of Risk and Insurance — Vol. 58, n° 3, p. 438-451 (1991)

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Authors
  • Eeckhoudt, LouisUCLouvain
    Author
  • Bauwens, Lucorcid-logoUCLouvain
    Author
  • Briys, E.
    Author
  • Scarmure, P.
    Author
Abstract
(en) Using an expected utility approach the effect of "risk subdividing" on insurance demand is analyzed. The results indicate that when the total property at risk is scattered only on a small number of pieces (with independent risks), risk retention becomes very attractive relatively to market insurance with a positive loading.
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Eeckhoudt, L., Bauwens, L., Briys, E., & Scarmure, P. (1991). The Law of Large (small) Numbers and the Demand for Insurance. Journal of Risk and Insurance, 58(3), 438-451. https://doi.org/10.2307/253401 (Original work published 1991)