Out of time? The effect of an infrequent traumatic event on individuals’ time and risk preferences, beliefs, and insurance purchasing

This study examines the effect on time preferences and the purchase of insurance by persons closely acquainted with someone who was in danger of physical injury (trauma) during Israel's military operation in the Gaza Strip in 2014. To this end, I use panel data to track the same individuals before and after the trauma. My results reveal that experiencing trauma increases individuals’ purchases of insurance, and in particular supplementary health and long-term care insurance. Investigating the mechanisms behind the results, I find that people become more future-oriented after someone close to them was in danger of physical injury during that military operation. However, I cannot completely rule out other causes such as an increase in risk aversion or changes in individuals’ beliefs.