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Splitting Risks in Insurance Markets With Adverse Selection

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  • Pierre Picard

Abstract

We characterize the design of insurance schemes when policyholders face several insurable risks in a context of adverse selection. Splitting risks emerges as a feature of second‐best Pareto optimality. This may take the form of risk‐specific contracts, or of contracts where risks are bundled but subject to differential coverage rules, such as risk‐specific copayments combined with a deductible or a cap on coverage.

Suggested Citation

  • Pierre Picard, 2020. "Splitting Risks in Insurance Markets With Adverse Selection," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 997-1033, December.
    • Handle: RePEc:bla:jrinsu:v:87:y:2020:i:4:p:997-1033
    DOI: 10.1111/jori.12278
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    References listed on IDEAS

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    Cited by:

    1. Chi, Yichun & Zhuang, Sheng Chao, 2022. "Regret-based optimal insurance design," Insurance: Mathematics and Economics, Elsevier, vol. 102(C), pages 22-41.
    2. Olga I. Vikarchuk & Serhii M. Nikolaienko & Olena O. Kalinichenko & Iryna O. Poita, 2020. "Integrated evaluation as a precedence of economic security management insurance market," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 0(2 suppl.), pages 157-171.
    3. M. Martin Boyer & Franca Glenzer, 2021. "Pensions, annuities, and long-term care insurance: on the impact of risk screening," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 46(2), pages 133-174, September.

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