Introduction
The Dutch situation
Potential determinants of the decision to opt for a voluntary deductible
Loss aversion
Premium | |||
---|---|---|---|
Excluded | Included | ||
Process | One-stage process | Scenario 1: Mixed prospect | Scenario 3: Loss prospect |
Probability p to gain €240 (x) Probability 1 − p
a to lose €260 (y)b,c
| Probability p to lose €917 (x) Probability 1 − p to lose €1417 (y) | ||
V (p, x; y) = ω
+(p) × υ(240) + ω
−(1 − p) × υ(−260) |
V (p, x; y) = ω
−(p) × (υ(−1417)–υ(−917)) + υ(−917) | ||
Two-stage process | Scenario 2: Gain and loss prospect | Scenario 4: Loss and loss prospect | |
Certainty of gaining €240 (x) AND Probability p to lose nothing (y) Probability 1 − p to lose €500 (z) | Certainty of losing €917 (x) AND Probability p to lose nothing (y) Probability 1 − p to lose €500 (z) | ||
V (1, x) = υ(240) AND
V (p, y; z) = ω
+(p) × υ(0) + ω
−(1 − p) × υ(−500) |
V (1, x) = υ(−917) AND
V (p, y; z) = ω
+(p) × υ(0) + ω
−(1 − p) × υ(−500) |
Risk attitude
Ambiguity aversion
Debt aversion
Omission bias
Liquidity constraints
Overview of potential determinants
Potential strategies
Strategy 1 | Strategy 2 | Strategy 3 | Strategy 4 | Strategy 5 | |
---|---|---|---|---|---|
Default option | Information regarding the voluntary deductible | Information regarding healthcare expenses | No-claim rebate | Saving for healthcare | |
Loss aversion | If the reference point is ‘opting for a VD’, loss aversion is eliminated. If ‘not opting for a VD’ is the reference point, then loss aversion remains the same | – | – | Loss aversion could be reduced depending on whether loss aversion occurs for the premium | – |
Risk attitude | If the reference point is ‘opting for a VD’: risk seeking. If ‘not opting for a VD’ is the reference point: risk aversion | – | – | – | – |
Ambiguity aversion | – | Increased competence and decreased ambiguity aversion | Reduced effect of ambiguity aversion | – | – |
Debt aversion | – | – | – | Reduced effect of debt aversion | Reduced effect of debt aversion |
Omission bias | Omission bias remains, but causes the insured to retain the VD | – | – | – | – |
Liquidity constraints | – | – | – | – | Reduced effect of liquidity constraints |
Default option
Opting for a voluntary deductible | Not opting for a voluntary deductible |
---|---|
Strategy 1—Present the voluntary deductible as the default option | |
Probability p to lose nothing (x) Probability 1 − p to lose €500 (y) | Certainty of a premium increase of €240 (x) |
V (p, x; y) = ω
+(p) × υ(0) + ω
−(1 − p) × υ(−500) |
V (1, x) = υ(−240) |
Strategy 4—Offer a voluntary deductible in the form of a no-claim rebate | |
Probability p to gain €240 (x) Probability 1 − p to pay €260 (y) too much | Certainty to lose nothing (x) |
V (p, x; y) = ω
+(p) × υ(240) + ω
−(1 − p) × υ(−260) |
V (1, x) = υ(0) |
Provision of information regarding the voluntary deductible
Provision of information regarding healthcare expenses
No-claim rebate
Saving for healthcare
Premium rebate | Total premium rebate on savings account | Healthcare expenses under the voluntary deductible | Account balance at the end of the calendar year | |
---|---|---|---|---|
Year 1 | 240 | 240 | 25 | 215 |
Year 2 | 240 | 480 | 120 | 335 |
Year 3 | 240 | 720 | 500 | 75 |
Year 4 | 240 | 960 | 175 | 140 |
Year 5 | 240 | 1200 | 0 | 380 |