Do time preferences explain low health insurance take‐up?. Issue 4 (10th August 2022)

• Record Type: Journal Article
• Authors: Baillon, Aurélien; O'Donnell, Owen; Quimbo, Stella; van Wilgenburg, Kim
• Is Part Of: Journal of risk and insurance. Volume 89:Issue 4(2022)
• Page Start: 951
• Page End: 983
• Publication Date: 2022-08-10
• Subjects: health insurance -- liquidity constraint -- preference elicitation -- present bias -- prospect theory -- time preference; Insurance -- United States -- Periodicals; 368.97305
• DOI: 10.1111/jori.12395
• Languages: English
• ISSNs: 0022-4367

Abstract

Abstract: Low insurance take‐up in low‐income populations is not easily explained by the standard single‐period expected utility model of insurance that overlooks the relevance of time preference when liquidity is constrained. We design field survey instruments to elicit quasi‐hyperbolic time preferences, as well as prospect theory risk preferences, and use them to examine whether time preferences explain health insurance behavior of low‐income Filipinos. Consistent with theory, those with stronger parameterized time preference are less likely to insure and the partial association is most pronounced at low wealth where liquidity is most likely to be constrained. Among those with better understanding of insurance, lower take‐up is also associated with present bias. We do not find that insurance is significantly associated with risk preferences.