This Doctoral Dissertation Improvement Award is to support research whose objective is to understand how individuals formulate and make decisions about insurance as a form of financial protection against low probability but high consequence events. Adults will be interviewed regarding three different insurance decisions. The study is designed as a conceptual replication of the well-known Kunreuther (1978) study of how people make hazard (flood and earthquake) insurance decisions. This involves testing models based upon Subjective Expected Utility (SEU) and information diffusion theories, that latter of which has been hypothesized to be descriptively more accurate. The research objectives are to (1) test whether the information diffusion theory generalizes to other types of insurance, (2) determine whether SEU predicts better when improved response elicitation methods are used, and (3) determine whether people use consistent strategies when considering different kinds of insurance. In addition, the project will examine whether consumers' intuitive definitions of insurance (and its purposes), beliefs about the insurance system, and budget constraints predict consumers' decisions.
