A Survey on Overconfidence, Insurance and Self-Assessment Training Programs∗

As argued by Werner DeBondt and Richard H. Thaler (1995): “Perhaps the most robust finding in the psychology of judgment is that people are overconfident.” This paper surveys part of the vast empirical and experimental literature on overconfidence. We find broad evidence that many subjects underestimate their health and driving risk, and that this often results in underinvestment in precautions such as insurance. We conclude our review by discussing training techniques developed to reduce driving overconfidence and improve traffic safety. ∗This survey has been prepared while researching for our paper titled "The Overconfidence Problem in Insurance Markets". We thank Johannes Hoff and Topi Miettinen for excellent research assistance. †Kellogg School of Management, MEDS Department, 2001 Sheridan Rd., Evanston, IL 60208, USA. ‡Department of Economics, Gower Street, London WC1E 6BT, UK.