A major puzzle in insurance economics is the fact that people underinsure low-probability events with high losses and overinsure
The first group saw the Soviet Union operating in an environment in which it had real enemies and "a compulsion to overinsure
against potential threats.
222) In other instances, individuals may irrationally overestimate risk and so overinsure
incentive for insurers to overinsure
may diminish somewhat.
As the creditors moved in, Brocket decided to overinsure
four of the cars and stage their theft.
insurance but try not to overinsure
because this may
This is also consistent with work in behavioral economics that postulates that managers in the risk management department of a firm might somewhat overinsure
the firm as a precaution against being held responsible for large losses that might occur if the firm is underinsured (Borkan and Kunreuther, 1979).
This asymmetry in information means that premiums for high-risk people are too low and premiums for low-risk people are too high, with the result that high-risk people overinsure
and many low-risk people drop out of--or never get into--the market.
promisee, (3) overinsure
the promisee, and (4) expose the promisor to
569, 573 (1985) (noting that producers will overinsure
when faced with legal instability).
L] in Figure 4) and overinsure
high-risk-aversion consumers if not subject to any feasibility constraint.
If premia are better than fair, and if consumers cannot overinsure
, then q = X and the indifference curve will not be tangent to the odds lines as they cross the 45[degrees] line.