Advanced Search
MyIDEAS: Login to save this paper or follow this series

Insurance Contracts under Adverse Selection with Random Loss Severity

Contents:

Author Info

Abstract

Dans l'analyse des problèmes d'antisélection en assurance, on suppose généralement que la richesse des individus est une variable aléqtoire binaire, selon que l'individu subit ou non une perte. Ceci interdit d'analyser la forme du contrat d'assurance partielle destiné aux individus à faible risque. Nous généralisons ici le modèle standard au cas où il y a plusieurs valeurs de perte, en considérant des distributions arbitraires sur un continuum de pertes. Nous montrons que l'espérance de perte est un critère suffisant pour identifier les catégories d'individus à risque faible et à risque élevé, de façon à reproduire les résultats de Rothschild et Stiglitz sur les marchés d'assurance concurrentiels. Nous montrons que la forme du contrat destiné aux individus à faible risque dépend de la nature de l'information révélée par le montant de la perte. Dans l'analyse de ce contrat, nous prenons également en considération la possibilité d'asymétries d'information ex post relativement aux états de perte. In the literature on adverse selection in insurance markets, it is usually assumed that the loss faced by individuals is single-valued. This precludes the analysis of the form of the incomplete coverage contract designed for the low-risk class. In the present paper, the two-type adverse selection model is extended to the case where the severity of the loss is random, by considering general distributions over a continuum of losses. We show that the expected value of the loss is sufficient to characterize the high and low risk types and to generalize Rothschild and Stiglitz' competitive market results. The form of the second-best contract for the low risks is shown to depend on the nature of the information revealed by the severity of the loss. In analyzing the form of this contract, we also allow for the possibility of ex post informational symmetries with respect to loss events.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Université du Québec à Montréal, Département des sciences économiques in its series Cahiers de recherche du Département des sciences économiques, UQAM with number 9510.

as in new window
Length:
Date of creation: Sep 1995
Date of revision:
Handle: RePEc:cre:uqamwp:9510

Note: To receive copy, email author
Contact details of provider:
Postal: P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8
Phone: (514) 987-4114
Fax: (514) 987-8494
Email:
Web page: http://www.uqam.ca/economie/
More information through EDIRC

Related research

Keywords: Assurance; antisélection; autosélection; contrats; franchise; coassurance. Insurance; adverse selection; self-selection; contract design; deductible; coinsurance.;

Other versions of this item:

Find related papers by JEL classification:

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. G. Dionne & C. Vanasse, 1997. "Une évaluation empirique de la nouvelle tarification de l'assurance automobile (1992) au Québec," THEMA Working Papers 97-22, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.

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:cre:uqamwp:9510. 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: (Stéphane Pallage).

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.