Advanced Search
MyIDEAS: Login to save this article or follow this journal

Explaining Insurance Policy Provisions via Adverse Selection

Contents:

Author Info

  • Virginia R. Young

    (School of Business, University of Wisconsin—Madison, Madison, WI 53706)

  • Mark J. Browne

    (School of Business, University of Wisconsin—Madison, Madison, WI 53706)

Registered author(s):

    Abstract

    In this article, we show that common insurance policy provisions—namely, deductibles, coinsurance, and maximum limits—can arise as a result of adverse selection in a competitive insurance market. Research on adverse selection typically builds on the assumption that different risk types suffer the same size loss and differ only in their probability of loss. In this study, we allow the severity of the insurance loss to be random and, thus, generalize the results of Rothschild and Stiglitz [1976] and Wilson [1977]. We characterize the separating equilibrium contracts in a Rothschild-Stiglitz competitive market. By further assuming a Wilson competitive market, we show that an anticipatory equilibrium might be achieved by pooling, and we characterize the optimal pooling contract. The Geneva Papers on Risk and Insurance Theory (1997) 22, 121–134. doi:10.1023/A:1008616117296

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.palgrave-journals.com/grir/journal/v22/n2/pdf/grir199794a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/grir/journal/v22/n2/full/grir199794a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.

    Volume (Year): 22 (1997)
    Issue (Month): 2 (December)
    Pages: 121-134

    as in new window
    Handle: RePEc:pal:genrir:v:22:y:1997:i:2:p:121-134

    Contact details of provider:
    Web page: http://www.palgrave-journals.com/

    Order Information:
    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
    Email:
    Web: http://www.palgrave-journals.com/pal/subscribe/index.html

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Young, Virginia R., 1999. "Optimal insurance under Wang's premium principle," Insurance: Mathematics and Economics, Elsevier, vol. 25(2), pages 109-122, November.
    2. Jeffrey R. Brown & Amy Finkelstein, 2008. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 98(3), pages 1083-1102, June.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pal:genrir:v:22:y:1997:i:2:p:121-134. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Gale).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.