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Insuring non-verifiable losses

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Author Info

  • Doherty, Neil A.
  • Laux, Christian
  • Muermann, Alexander
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    Abstract

    Insurance contracts are often complex and difficult to verify outside the insurance relation. We show that standard one-period insurance policies with an upper limit and a deductible are the optimal incentive-compatible contracts in a competitive market with repeated interaction. Optimal group insurance policies involve a joint upper limit but individual deductibles and insurance brokers can play a role implementing such contracts for the group of clients. Our model provides new insights and predictions about the determinants of insurance. --

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    File URL: http://econstor.eu/bitstream/10419/57366/1/67942671X.pdf
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    Bibliographic Info

    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2011/31.

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    Date of creation: 2011
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    Handle: RePEc:zbw:cfswop:201131

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    Related research

    Keywords: Deductible Insurance; Upper Limit; Implicit Insurance Contracts; Insurance Brokers;

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