Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance
David M. Cutler, Amy Finkelstein, Kathleen McGarry (2008)
http://papers.nber.org/papers/W13746
We present empirical evidence in five difference insurance markets in the United States ... we show that individuals who engage in risky behavior or who do not engage in risk reducing behavior are systematically less likely to hold (a range of insurance products). (However), we show that the sign of this preference effect differs across markets, tending to induce lower risk individuals to purchase insurance in some of these markets, but higher risk individuals to purchase insurance in others.
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