Risk Neutrality and Strategic Insurance
AbstractThe paper shows that Legal Cost Insurance (LCI) is a device to enhance potential litigants? bargaining position rather than to re-allocate risk. Being insured decreases the cost an insured party has to bear if settlement negotiations fail and the case goes to trial. This shifts the threat points, which has an impact on the bargaining result. In negative expected value suits, LCI can make the threat to sue credible and motivate potential defendants to make positive settlement offers. Hence, even risk-neutral agents may find it beneficial to insure. -- Diese beiden Diskussionspapiere zeigen, daÃ Rechtsschutzversicherungen eher ein Mittel zur Positionsverbesserung bei Vergleichsverhandlungen als ein Mittel der Risiko-Reallokation sind. Die Versicherung senkt die Kosten, die im Falle des Scheiterns der Vergelcihsverhandlungen und eines Prozesses noch zu tragen wÃ¤ren. Hierdurch verschiebt sich der Drohpunkt und damit auch das Vergleichsergebnis. In FÃ¤llen mit negativem Erwartungswert kann die Versicherung sogar die Klagedrohung glaubwÃ¼rdig machen und den Beklagten Ã¼berhaupt zu einem positiven Vergleichsergebnis motivieren. Dadurch ist eine Rechtsschutzversicherung auch fÃ¼r risikoneutrale Akteure interessant.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance.
Volume (Year): 25 (2000)
Issue (Month): 2 (April)
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Other versions of this item:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
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