Behavioral biases and strategies of insurance market players.

Summary The objective of this thesis is to analyze the interactions between economic agents operating in the retail insurance market. On the one hand, policyholders wishing to cover themselves against a risk of loss must explore the market in order to subscribe to a contract in line with their perception of the risk. On the other hand, insurers compete in a regulated market, imposing on them a certain level of capital in order to guarantee their solvency in a context of uncertainty about the risks underwritten. On the other hand, intermediaries offer their services in order to facilitate the interaction between consumers, who are averse to risk, and firms, which take risks. It is therefore in this context that we analyze the behavior of insurance actors from different perspectives. Chapters 1 and 2 of this thesis are the result of laboratory experiments, carried out using a web interface designed specifically for these studies. The results in Chapter 3 are based on a theoretical model and numerical simulations. Chapter 1 focuses on the relationship between honesty and honesty beliefs of economic agents. Using data collected in the laboratory, we show how uncertainty and the feeling of being in more or less advantageous conditions impact both the level of honesty and the belief in honesty towards others. In general, consumers overestimate the honesty of intermediaries. Thus, this result justifies their presence in the insurance market. On the other hand, we also show that the financial incentives offered to intermediaries distort honesty beliefs. The lower the incentive level, the more dishonest behavior is anticipated by consumers. In Chapter 2, we highlight the dilemma faced by the consumer in a market with multiple distribution channels. Should he explore by himself and choose among a large set of contracts or delegate part of his decision to an intermediary plus or minus search costs, we show that obfuscation related to a large amount of information and beliefs in the honesty of intermediaries are the main determinants of search and purchase decisions. We also show that obfuscation and intermediaries' attitudes are sources of inefficiency in decision making, in particular with respect to the characteristics of the insurance contracts purchased by consumers. In this sense, the identification of a focus effect supports the importance of the price level in decision making to the detriment of the risk environment and the level of coverage. The introduction of search costs in the exploration process, as well as the heterogeneity of honesty beliefs, justify the multi-channel distribution strategies adopted by insurers. An analysis of a repeated non-cooperative game is presented in Chapter 3 of this thesis where losses and consumer behavior are stochastic and insurers compete on price. In order to incorporate the regulators' constraints, we determine Nash equilibria under solvency constraints. We also analyze the sensitivity of equilibrium premiums to the parameters of the game, in particular when firms do not benefit from the same comparative advantages (i.e. reputation leading to different levels of customer retention, insurers' seniority leading to different capital stocks).