Decision Making in Insurance The Behavioral Finance Perspective

Abstract

Examining how behavioral finance has affected the insurance industry from a supply and demand perspective is the primary goal of this research.On the demand side, it looks at how heuristics like availability, overconfidence, and loss aversion impact policyholder decisions including insurance product choice, premium willingness, and risk perception.It looks at the supply side by looking at how behavioral characteristics impact pricing strategies, risk assessment, and product creation from the perspective of insurers.This study aims to discover important patterns of behavior that impact market efficiency and consumer happiness through the use of quantitative analysis, case studies, and surveys.In addition, the study delves into how insurers may benefit from a better grasp of behavioral finance by creating policies that prioritize customers and by enhancing their decision-making frameworks for better risk management and profitability.The results of this study shed light on the significance of mental processes in making sound financial decisions and provide ways to lessen the impact of cognitive biases.The insurance business can strengthen the financial ecosystem and better match products with consumer demands by tackling these behavioral aspects.

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