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Risk classification and the balance of information in insurance; an alternative interpretation of the evidence

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  • Casper H. de Jong

Abstract

The purpose of this paper is to enhance understanding of the factors influencing the balance of information between policyholder and insurer. The emphasis is on the effects of risk classification. Starting from a theoretical scenario in which efficient risk classification prevents adverse selection, impediments to such risk classification and the effects of differences between insurers in this respect are being discussed. This approach offers both a more realistic and a simpler explanation for the presence of adverse selection.

Suggested Citation

  • Casper H. de Jong, 2021. "Risk classification and the balance of information in insurance; an alternative interpretation of the evidence," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(4), pages 445-461, December.
    • Handle: RePEc:bla:rmgtin:v:24:y:2021:i:4:p:445-461
    DOI: 10.1111/rmir.12198
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    References listed on IDEAS

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