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Ambiguity Increases and Insurance Deductibles

Ying, 2020; Lambregts, van Bruggen, and Bleichrodt, 2021).
20
Finally, since insurers’ financial strength may influence their decision-making (e.g.,
Weiss, Cheng, and Lin, 2024), future research might examine the heterogeneity of
21
insurers’ financial health and assess its effect on our results.

20 In the context of coinsurance, Peter and Ying (2020) prove that introducing ambiguity{defined as
uncertainty about the insurer’s nonperformance probability rather than uncertainty about the loss
probability{reduces insurance demand. Through a laboratory experiment, Lambregts et al. (2021)
find evidence supporting the findings of Peter and Ying (2020) for risk-prudent individuals but not for
ambiguity-averse individuals.
21 Weiss et al. (2024) find that using an internal actuary to certify loss reserves results in larger under-
reported loss reserves than using an external actuary. This result is more severe for financially weak
insurers than for financially strong insurers.

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