High-load insurance products, such as extended warranties and rental car insurance, often are
criticized for the large profits they generate at the expense of potentially uninformed consumers.
A popular solution is to require sellers to disclose more information, allowing consumers to
make an informed and rational economic decision. Whether or not such disclosure actually helps
consumers to make economically rational choices, however, remains an open question. We
conduct a laboratory experiment to determine whether disclosure affects demand for high-load
insurance and, if so, what information has the greatest effect. Following a paid real-effort task,
we present experiment subjects with a potential loss of their earnings and offer high-load
insurance to cover the loss. Subjects receive one of three additional information disclosures: (1)
the true probability of loss, (2) the expected loss or “cost of goods sold” for the insurer, or (3) the
insurer’s profit on the transaction. Ultimately, none of the disclosures has any significant effect
on demand, supporting existing evidence in other fields that disclosure is not effective in
changing behavior. These results demonstrate that mandated disclosure is not an appropriate
solution to the problem of high-load insurance and that alternative policies should be considered.