A new proposal to define insurance literacy: Paving the path ahead

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Abstract

While the importance of insurance is widely recognised, for individuals as well as for society as a whole, the number of individuals actually buying insurance is dramatically low. After stressing this concept in this paper we focus on the critical comparison between three strands of research: financial literacy, insurance literacy, and behavioural insurance literacy and decision-making. Through an in-depth analysis of previous studies and empirical evidence, we set the stage to adapt the various definitions of financial literacy to propose our own definition of insurance literacy as a three-dimensional construct, based on three key pillars: knowledge, skills, and understanding. Finally, we analyse the limits resulting from the lack of insurance literacy and the possible benefits literate consumers can achieve. While our paper is built around our theoretical proposal of a new definition of insurance literacy, it can constitute an incentive for other researchers to analyse more in-depth insurance-related decisions with empirical studies, based on our theoretical foundation. Our final goal is thus to pave the way ahead.

Keywords: Financial Literacy, Insurance Literacy, Insurance Knowledge, Insurance Understanding, Insurance Skills

Authors’ individual contribution: Conceptualization – E.A.; Methodology – G.P.S.; Writing – Original Draft – E.A. and G.P.S.; Writing – Review & Editing – E.A. and G.P.S.; Visualization – E.M.C.; Supervision – E.M.C.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G20, G22, G40

Received: 25.09.2020
Accepted: 01.12.2020
Published online: 04.12.2020

How to cite this paper: Allodi, E., Cervellati, E. M., & Stella, G. P. (2020). A new proposal to define insurance literacy: Paving the path ahead. Risk Governance and Control: Financial Markets & Institutions, 10(4), 22-32. https://doi.org/10.22495/rgcv10i4p2