Optimal insurance in the presence of multiple policyholders
| Autor: | Steven Vanduffel, Carole Bernard, Fangda Liu |
|---|---|
| Přispěvatelé: | Business |
| Rok vydání: | 2020 |
| Předmět: |
Reinsurance
Organizational Behavior and Human Resource Management Economics and Econometrics 050208 finance Actuarial science Longevity risk 05 social sciences Pooling Diversification (finance) Public policy Indifference price Insurance policy 0502 economics and business Systematic risk Business 050207 economics |
| Zdroj: | Journal of Economic Behavior & Organization. 180:638-656 |
| ISSN: | 0167-2681 |
| DOI: | 10.1016/j.jebo.2020.02.012 |
| Popis: | The literature on optimal insurance typically considers optimal risk sharing between one insurer (or reinsurer) and one insurance prospect. However, the insurance business is based on diversification benefits that arise when pooling many insurance policies. In this paper, we first show that the classical results on optimal insurance in the case of a single insurance prospect remain valid when there are multiple prospects, provided their insurance claims are independent. Specifically, all prospects receive coverage. However, due to phenomena such as medical progress, longevity risk, and natural or man-made disasters, insurance claims tend to be correlated. We show that in the case of interdependent insurance policies, it may become optimal for the insurer to refuse to sell insurance to some prospects, and this decision is driven by the prospects’ attitudes towards risk and their risk exposure characteristics. This finding calls for government policies to ensure that insurance remains available and affordable to everyone. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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