No. 284 - Background Uncertainty and the Demand for Insurance against Insurable Risks

by Luigi Guiso and Tullio Jappelli
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Theory suggests that people facing higher uninsurable background risk buy more insurance against other risks that are insurable. This proposition is supported by Italian cross-sectional data. It is shown that the probability of purchasing casualty insurance increases with earnings uncertainty. This finding is consistent with consumer preferences being characterised by decreasing absolute prudence.

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  1. 30 October 1996
    No. 284 - Background Uncertainty and the Demand for Insurance against Insurable Risks
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