Firm's Demand for Insurance: An Explorative Approach

This paper addresses the question, what influences the insurance demand of companies and examines the influence of managerial risk aversion in this decision process. An explorative research approach based on qualitative data analysis is applied to explore the factors influencing the insurance related decision behavior in organizations. Using interviews and observations of firm’s insurance managers, the results identify interdependencies between factors of insurance demand, such as ownership structure, managerial discretion, volatility of earning, size, services of the insurer and business diversification which allows to propose a framework of contextual factors affecting company’s insurance demand. Within this framework, the data imply managerial risk attitudes as decisive factor in the decision process about insurance demand in companies. This explorative study enriches the existing theories of firms’ insurance demand and addresses feedback from practice into theory.