Insurance On The Internet: A Different View

Abstract

We explain the apparent failure to sell insurance over the Internet by drawing on the process of simplification. That is, people tend to use a reduced set of a given decision problem in order to decrease cognitive load. In the context of insurance, this process is shown to result in underestimation of risk, and consequently in low amounts of insurance sold. The solution to this problem lies in making loss information mentally available, for which the multimedia capabilities of the Internet may prove useful.