Marc Fleurbaey (CATT, THEMA, Université de Pau, Avenue de l'Université, 64000 Pau, France) Walter Bossert () (Département de Sciences Economiques and C.R.D.E., Université de Montréal, C.P. 6128, succursale Centre-ville, Montréal QC H3C 3J7, Canada)
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We analyze the equity properties of insurance premium schemes where agents are partitioned into groups with different average accident probabilities and each individual has to pay a premium according to the average probability of the group to which it belongs. In particular, we examine the question whether choosing finer partitions to define these groups generates more equitable situations than coarser groups. Though it turns out that partitioning the agents into finer groups can never be Lorenz dominated by the coarser partition, it cannot be guaranteed that finer partitions represent improvements over coarser ones except in very restrictive circumstances.
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