A Gentle Introduction to Risk Aversion and Utility Theory American Chronicle
11.04.10
By Cather, David A
INTRODUCTION One of the largest and least understood industries in the world is the insurance industry. Browne et al. (2000) estimate that 8 percent of the world's GDP is spent on insurance products. Global insurance premiums totaled $3.7 trillion in 2006, and the United States ranked first among all countries as the largest consumer of insurance products in the world (Swiss Re, 2007). For most noncommercial consumers in the United States, insurance consumption has focused on personal insurance products, such as auto, health, homeowners, life, and retirement insurance products. But while they spend a great deal of money on insurance, many consumers appear to have a limited understanding of the factors that affect their demand for insurance products.1
People buy insurance for a variety of reasons. In some instances, the purchase is required by law, as is the case for compulsory auto liability insurance. In other cases, consumers buy insurance to satisfy the requirements
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Encompass Auto Insurance
Encompass Auto Insurance is one of the companies that gives you not just good service but also confidence. Encompass Auto Insurance is a division of Allstate Insurance Company so you know that you’re in good hands. While the trade name Allstate remains on the products for agents the company has on payroll, Encompass Auto Insurance is for Independent Agents that want to sell a quality product. The ratings for the company’s financial strength are high according to the A.M. Best Company that rates insurance companies.
Encompass Insurance is just one of the many insurance companies you’ll find online. They tend to offer low prices. Encompass also offers good service. Online companies can do one thing for you that brick and mortar companies can’t. They can give you quotes and service 24 hours a day. They also respond to claims 24/7 so you have someone to put your fears to rest if you have an accident after office hours. Try calling your present insurance representative at 3:00 in the morning and see what kind of a response you get. It won’t be friendly, that’s for sure, if you get any at all.
People change insurance companies for several reasons but the biggest reason most people change is for price. Most people open their bill for their auto insurance, gasp for a second and dutifully write out a check for the amount shown on the invoice. They never take the time to get a quote from another company or even bother to see if they could get the same coverage for less money. The sad part, is that it only takes a few minutes when you do this online and you don’t have an agent calling you every ten seconds or pressuring you to make a change.
Why don’t people compare rates? There are many reasons. One reason is that they aren’t aware of how easy it is to do that. The second is that, like many things, it’s easier to go with the status quo and pay the higher price. This attitude costs people hundreds and thousands of dollars every year.
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