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Full Coverage for Minor, Recurrent Losses?

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Abstract

This note looks at insurance of minor, recurrent losses. The main concern is with efficiency properties of full coverage. As motivation and running example we concider a regime, currently operative in several European countries, that offers employees complete wage reimbursement during short spell sickness. Assembled here are some arguments speaking against this sort of insurance policy.

Suggested Citation

  • Flåm, Sjur Didrik, 2002. "Full Coverage for Minor, Recurrent Losses?," Working Papers in Economics 10/02, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2002_010
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    References listed on IDEAS

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    1. MOSSIN, Jan, 1968. "Aspects of rational insurance purchasing," LIDAM Reprints CORE 23, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Doherty, Neil A & Schlesinger, Harris, 1983. "Optimal Insurance in Incomplete Markets," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1045-1054, December.
    3. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614, Elsevier.
    4. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    5. LeRoy,Stephen F. & Werner,Jan, 2014. "Principles of Financial Economics," Cambridge Books, Cambridge University Press, number 9781107024120, February.
    6. Baton, Bernard & Lemaire, Jean, 1981. "The Core of a Reinsurance Market," ASTIN Bulletin, Cambridge University Press, vol. 12(1), pages 57-71, June.
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    More about this item

    Keywords

    risk sharing; coinsurance; deductible; non-insurable risk; Pareto efficiency; mutual insurance; arbitrage; adverse selection; moral hazard.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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