Book Reviews

Abstract

Nathaniel Hendren of Harvard University reviews “Insurance and Behavioral Economics: Improving Decisions in the Most Misunderstood Industry”, by Howard C. Kunreuther, Mark V. Pauly, and Stacey McMorrow. The Econlit abstract of this book begins: “Explores the behavior of individuals at risk, insurance industry decision-makers, and policymakers at the local, state, and federal levels involved in the selling, buying, and regulating of insurance. Discusses an introduction to insurance in practice and theory; anomalies and rumors of anomalies; behavior consistent with benchmark models; real-world complications; why people do or do not demand insurance; demand anomalies; descriptive models of insurance supply; anomalies on the supply side; design principles for insurance; strategies for dealing with insurance-related anomalies; innovations in insurance markets through multiyear contracts; publicly provided social insurance; and a framework for prescriptive recommendations. Kunreuther is James G. Dinan Professor of Decision Sciences and Business and Public Policy in the Wharton School and Co-director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania. Pauly is Bendheim Professor in the Department of Health Care Management in the Wharton School at the University of Pennsylvania. McMorrow is a research associate in the Health Policy Center at the Urban Institute.”