Insurance Guarantees: A Review of Scientific Studies and Academic Knowledge

Introduction

Insurance guarantees are a crucial aspect of the insurance industry, providing policyholders with financial protection against various risks. Despite their importance, there is a need for a comprehensive review of scientific studies and academic knowledge on insurance guarantees. This article aims to fill this gap by providing an overview of insurance guarantees, their types, and their role in risk management. It also examines the findings of research studies, financial impacts, legal dimensions, and consumer behaviors related to insurance guarantees.

Definition and Types of Insurance Guarantees

Insurance guarantees are contractual agreements between an insurer and a policyholder, where the insurer promises to provide financial compensation in the event of a specified loss or damage. There are three main types of insurance guarantees: (1) broadening guarantees, which expand the scope of coverage; (2) narrowing guarantees, which limit the scope of coverage; and (3) exclusionary guarantees, which specify exceptions to the coverage (Outreville, 2013).

Role of Insurance Guarantees in Risk Management

Insurance guarantees play a vital role in risk management by providing policyholders with financial protection against various risks. They help to transfer risk from the policyholder to the insurer, reducing the policyholder´s financial exposure (Cummins, 2008). Insurance guarantees also provide a sense of security and confidence to policyholders, encouraging them to take on more risk (Kunreuther, 2002).

Scientific Studies and Research Findings

Numerous scientific studies have examined the impact of insurance guarantees on policyholders´ behavior and risk management. For example, a study by Browne and Hoyt (2000) found that policyholders who purchase insurance guarantees are more likely to engage in risky behavior, as they feel protected by the guarantee. Another study by Outreville (2013) found that insurance guarantees can lead to moral hazard, as policyholders may take on more risk knowing that they are protected by the guarantee.

Financial Impacts

Insurance guarantees can have significant financial impacts on both policyholders and insurers. For policyholders, insurance guarantees can provide financial protection against losses, reducing their financial exposure (Cummins, 2008). For insurers, insurance guarantees can increase their financial risk, as they may be required to pay out claims (Outreville, 2013).

Legal Dimensions

Insurance guarantees are governed by a complex set of laws and regulations. For example, the Insurance Contracts Act 1984 (Australia) requires insurers to provide clear and concise information about insurance guarantees to policyholders (Australian Government, 2022). Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (USA) regulates the sale of insurance guarantees to consumers (U.S. Government, 2022).

Consumer Behaviors

Consumer behaviors play a crucial role in the demand for insurance guarantees. For example, a study by Kunreuther (2002) found that consumers who are more risk-averse are more likely to purchase insurance guarantees. Another study by Browne and Hoyt (2000) found that consumers who are more informed about insurance guarantees are more likely to purchase them. In conclusion, insurance guarantees are a critical aspect of the insurance industry, providing policyholders with financial protection against various risks. This article has provided an overview of insurance guarantees, their types, and their role in risk management. It has also examined the findings of research studies, financial impacts, legal dimensions, and consumer behaviors related to insurance guarantees. Further research is needed to fully understand the complexities of insurance guarantees and their impact on the insurance industry.