Determinant of Optimal Insurance in a Univariate Context: The Case of a �Non-Pecuniary Risk�

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Author	Mohamed Anouar Razgallah, Abderrazek Zannoun
ISSN	2307-2466
On Pages	262-272
Volume No.	3
Issue No.	6
Issue Date	November 01, 2020
Publishing Date	November 01, 2020
Keywords	Non Pecuniary Risk, Insurance, Risk Aversion, Marginal Utility

Abstract

Using a model of univariate decision under risk, we analyze the demand insurance when there is a single source of risk: a non pecuniary risk insurable. We examine how the insurable non pecuniary risk affects the demand for insurance of the individual. We show that the determinants of the demand for insurance are not only the shape of the insurance premium as offered by (Bernoulli, Mossin-Smith 1968), the correlation between the insurable financial risk and uninsurable financial risks as shown by Doherty and Schlesinger (1983a) and the variation of the marginal utility of wealth with respect to the health status (Rey, 2003), but also the way in which the occurrence of the insurable non pecuniary risk affects the marginal utility of wealth.

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