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Risks 2018, 6(4), 145; https://doi.org/10.3390/risks6040145

Memory, Risk Aversion, and Nonlife Insurance Consumption: Evidence from Emerging and Developing Markets

1
Department of Economics & Public Policy, Indian Institute of Management Rohtak, Management City, Southern Bypass, NH 10, Sunaria, Rohtak, Haryana 124001, India
2
Department of Finance & Accounting, Indian Institute of Management Rohtak, Management City, Southern Bypass, NH 10, Sunaria, Rohtak, Haryana 124001, India
*
Author to whom correspondence should be addressed.
Received: 10 October 2018 / Revised: 23 November 2018 / Accepted: 6 December 2018 / Published: 14 December 2018
(This article belongs to the Special Issue Systemic Risk in Finance and Insurance)
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Abstract

Policymakers in developing and emerging countries are facing higher risk that is related to natural disasters in comparison to developed ones because of persistent problem of supply-side bottleneck for disaster insurance. Additionally, lower insurance consumption, higher disaster risk, and high income elasticity of insurance demand have worsened the loss consequences of natural disaster in these markets. In this context, current study for the first time argues that the supply side bottleneck problem has its origin in peculiar pattern of disaster consumption owing to memory cues. The study finds that relatively higher frequency of natural disasters acts as a negative memory cue and positively impacts insurance consumption. On the other hand, a relatively lower frequency of natural disasters adversely impacts insurance consumption in the background of variation in risk aversion behavior. For this purpose, current study has based its work on Mullainathan (2002), which builds its argument around memory cues. View Full-Text
Keywords: natural disasters; nonlife insurance consumption; developing countries; risk aversion; memory cues natural disasters; nonlife insurance consumption; developing countries; risk aversion; memory cues
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Tiwari, A.; Patro, A. Memory, Risk Aversion, and Nonlife Insurance Consumption: Evidence from Emerging and Developing Markets. Risks 2018, 6, 145.

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