Risk Misperception and Selection in Insurance Markets: An Application to Demand for Cancer Insurance

.......................................................................................................................................iii Acknowledgements and Declaration of Co-Authored Material..........................................iv List of Tables...............................................................................................................................xi List of Figures..............................................................................................................................xii I. Overview..................................................................................................................................1 II. Literature Review...................................................................................................................6 III. Testing for Selection in a Hypothetical Market...............................................................10 IV. Survey Considerations........................................................................................................13 IV.A. Risk Perception....................................................................................................14 IV.B. Risk Preference....................................................................................................16 IV.C. Health History and Objective Cancer Risk.......................................................16 IV.D. Cancer Insurance Demand...............................................................................17 IV.E. Cognitive Ability..................................................................................................18 IV.F. Demographics......................................................................................................18 V. Indexes for Optimism and Effort........................................................................................19 VI. Selection Model and Results..............................................................................................28 VI.A. Optimism and Preventative Behavior..............................................................28 VI.B. Baseline Optimism and Demand for Insurance..............................................32 VI.C. Insurance Selection Classification Model.........................................................35 VI.D. Population Classification Predictions and Confidence Intervals.................38