An engaging and accessible examination of what ails insurance markets—and what to do about it—by three leading economists
“The authors . . . do a masterful job of explaining the intractable complexities created by this socially vital activity.”—Martin Wolf, Financial Times, “Best Books of 2022: Economics”
Why is dental insurance so crummy? Why is pet insurance so expensive? Why does your auto insurer ask for your credit score? The answer to these questions lies in understanding how insurance works. Unlike the market for other goods and services—for instance, a grocer who doesn’t care who buys the store’s broccoli or carrots—insurance providers are more careful in choosing their customers, because some are more expensive than others.
Unraveling the mysteries of insurance markets, Liran Einav, Amy Finkelstein, and Ray Fisman explore such issues as why insurers want to know so much about us and whether we should let them obtain this information; why insurance entrepreneurs often fail (and some tricks that may help them succeed); and whether we’d be better off with government-mandated health insurance instead of letting businesses, customers, and markets decide who gets coverage and at what price. With insurance at the center of divisive debates about privacy, equity, and the appropriate role of government, this book offers clear explanations for some of the critical business and policy issues you’ve often wondered about, as well as for others you haven’t yet considered.
Liran Einav is professor of economics at Stanford University. Amy Finkelstein is the John and Jennie S. MacDonald Professor of Economics at MIT. Ray Fisman is the Slater Family Chair in Behavioral Economics at Boston University.
“The authors, three US-based academics, keep the debate moving along with a chatty, breezy style. . . . The book hits its stride with the thornier problems insurance companies and their customers are beginning to face.”—Oliver Ralph, Financial Times
“The authors, professors at Stanford, MIT and Boston, do a masterful job of explaining the intractable complexities created by this socially vital activity.”—Martin Wolf, Financial Times, “Best Books of 2022: Economics”
“[The authors] craft an entertaining account of a subject most people encounter only when they write premium checks or file a claim.”—Harvard Magazine
“The book . . . is a classic example of how to present economic research in readable, digestible form.”—Tyler Cowen, Marginal Revolution (blog)
“A gem of a book.”—Mike Jakeman, Strategy + Business magazine
“The problem of hidden information is central to understanding insurance, and the nature of markets more generally. The very human cat-and-mouse stories that animate Risky Business are not only great fun; they also subtly reveal the basis of a great deal of economics.”—George Akerlof, Nobel laureate in Economic Sciences
“Most people—indeed, most policy makers—don’t fully get why the insurance business is really different from selling televisions or broccoli or even other financial products. Risky Business gives an accessible tour of why insurance is a special case and why it matters. Without a doubt, it is likely to be the most fun book you will ever read that includes the word ‘insurance’ in the title.”—Austan Goolsbee, former chair of the Council of Economic Advisors
“Risky Business does the seemingly impossible: it makes insurance fun! Picture the most interesting book you can imagine about insurance; I promise you, this book is three times better than the one you imagined. Throw out the economics textbooks—this is how people should learn economics!”—Steven D. Levitt, coauthor of Freakonomics
“This book is a fascinating look at how insurance markets work (or don’t). It’s a must read for people seeking to understand their own choices, and for policy makers who shape those options.”—Emily Oster, author of The Family Firm