Transparency in Place of Fair Insurance Pricing

The literature on insurance pricing fairness is anchored in the duality of solidarity pricing and individualized pricing. However, within both these pricing frameworks, conflicting principles of fair pricing emerge. I explain that such conflicts arise because the capital insurers need to pay consumers’ claims is a shared asset, and the total volatility consumers contribute to the insurer is non-linear. Since studies show that enacting transparency in pricing enhances consumer acceptance of the resulting prices, instead of pursuing idealized but contested fairness, I argue for pricing that insurance consumers perceive and accept as fair. I conclude with a hypothetical insurance pricing simulator in the form of a first-person game.