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Risk management in everyday insurance decisions: evidence from a process tracing study

Published online by Cambridge University Press:  01 April 2000

JANIS WILLIAMSON
Affiliation:
Psychology Subject Group, Bolton Institute, Deane Road, Bolton BL3 5AB, UK, e-mail: jwilliamson@bolton.ac.uk
ROB RANYARD
Affiliation:
Psychology Subject Group, Bolton Institute, Deane Road, Bolton BL3 5AB, UK
LISA CUTHBERT
Affiliation:
School of Cognitive and Computing Sciences, University of Sussex, UK
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Abstract

This study examined the applicability of Huber's (1997) model of risk management to a real-world consumer insurance decision, namely whether to insure a recently purchased item against possible mechanical breakdown in the future. Huber argued that decision makers manage the risks of negative outcomes by applying one or more defusing operators. Respondents in this study asked for whatever information they felt necessary to decide whether to take out an extended warranty on two consumer products of differing values. We found support for most aspects of the model, particularly in relation to risk defusing operators, but also identified some respondents who could not easily be accommodated within it, i.e. those who perceived risk, but did not seem prepared to take any action. We also found evidence for recognition primed insurance decisions. The results are interpreted from a bounded rationality perspective.

Type
Technical article
Copyright
© Cambridge University Press, 2000

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