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Equitable insurance premium schemes

Author

Listed:
  • Marc Fleurbaey

    (CATT, THEMA, Université de Pau, Avenue de l'Université, 64000 Pau, France)

  • Walter Bossert

    () (Département de Sciences Economiques and C.R.D.E., Université de Montréal, C.P. 6128, succursale Centre-ville, Montréal QC H3C 3J7, Canada)

Abstract

We analyze the equity properties of insurance premium schemes where agents are partitioned into groups with different average accident probabilities and each individual has to pay a premium according to the average probability of the group to which it belongs. In particular, we examine the question whether choosing finer partitions to define these groups generates more equitable situations than coarser groups. Though it turns out that partitioning the agents into finer groups can never be Lorenz dominated by the coarser partition, it cannot be guaranteed that finer partitions represent improvements over coarser ones except in very restrictive circumstances.

Suggested Citation

  • Marc Fleurbaey & Walter Bossert, 2002. "Equitable insurance premium schemes," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(1), pages 113-125.
  • Handle: RePEc:spr:sochwe:v:19:y:2002:i:1:p:113-125
    Note: Received: 27 March 2000/Accepted: 28 August 2000
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    Cited by:

    1. Aboudi, Ronny & Thon, Dominique, 2006. "Refinements of Muirhead's Lemma and income inequality," Mathematical Social Sciences, Elsevier, vol. 51(2), pages 201-216, March.
    2. Chakravarty, Satya R. & Zoli, Claudio, 2012. "Stochastic dominance relations for integer variables," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1331-1341.
    3. Michael Hoy & Julia Witt, 2007. "Welfare Effects of Banning Genetic Information in the Life Insurance Market: The Case of BRCA1/2 Genes," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 523-546.
    4. Yann Braouezec, 2015. "Public versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolistPublic versus Private Insurance System with (and without) Transaction ," Working Papers 2013-ECO-23, IESEG School of Management, revised May 2014.
    5. Michael Hoy & Michael Ruse, 2008. "“No Solution to This Dilemma Exists”: Discrimination, Insurance, and the Human Genome Project," Working Papers 0808, University of Guelph, Department of Economics and Finance.

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