Behavioral insurance: Theory and experiments

“Risk and insurance” provides an illustrative set of decisions made in the presence of uncertainty. As behavioral models become more integrated into economics and finance, many of their effects are illustrated quite well within insurance markets. Especially noteworthy are the complementary roles of theory and experiments. This article reviews the interactive role of experiments and theory in analyzing insurance demand from a behavioral perspective. We pay special attention to several models of underinvestment in insurance or in other risk-mitigation markets.