IDEAS home Printed from https://ideas.repec.org/a/wri/journl/v22y1999i1p1-25.html
   My bibliography  Save this article

Underwriting and Ambiguity: An Economic Analysis

Author

Listed:
  • Patrick L. Brockett
  • Gene C. Lai
  • Steven W. Pottier
  • Robert C. Witt

Abstract

A simplified financial-economic theory of the insurance firm under uncertainty is used to determine whether ambiguity about the expected claim frequency and/or the claim severity distribution for potential insured losses has any impact on the insurance rate. The model shows that the risk charge for ambiguity in both the claim frequency and claim severity distributions is higher than the risk charge for ambiguity in either the claim frequency or claim severity distribution alone. Our theoretical results are consistent with underwriters’ decisions and provide a more complete analysis of the insurance premium setting process than prior research.

Suggested Citation

  • Patrick L. Brockett & Gene C. Lai & Steven W. Pottier & Robert C. Witt, 1999. "Underwriting and Ambiguity: An Economic Analysis," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 22(1), pages 1-25.
  • Handle: RePEc:wri:journl:v:22:y:1999:i:1:p:1-25
    as

    Download full text from publisher

    File URL: http://www.insuranceissues.org/PDFs/221BLPW.pdf
    Download Restriction: no

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:22:y:1999:i:1:p:1-25. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.