D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision MakingReturn

This article examines the issue of cost optimization in the insurance industry under conditions of information asymmetry, with particular emphasis on moral hazard and adverse selection. The theoretical section reviews key economic models describing the behaviour of policyholders and insurers in the presence of information imbalances. The paper subsequently discusses selected instruments aimed at mitigating these inefficiencies, including screening and signalling mechanisms, behavioural approaches, regulatory interventions, and the application of data analytics. The findings suggest that effective cost management in insurance cannot be achieved without adequately addressing information asymmetries affecting both policyholders and insurers. The article proposes a conceptual framework that integrates microeconomic models with practical implications for cost management and risk selection mechanisms in the insurance sector.

The article is focused on genesis of behavioral economics and its applicability within public finance. Behavioral economics is being recently very popular and recognised by academic community as Nobel Prize was awarded to its promoters twice in current millennium. The document is divided in three parts, where one is devoted to overview of the theory, second contains recent trends in described theory and the last one presents case studies from United Kingdom and Poland. The theoretical part describes the basic concepts and theories in relation within historical context. The second part analyses applicability of such theory in public finance and current trends and finally, third chapter contains case studies, where the presented theory is applied in practice with remarkable results.