Risk Selection in Natural Disaster Insurance – the Case of France
It is widely recognized that “market failure” prevents efficient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks presenting public sector participation, often praised as public-private partnerships. We define risk selection as a situation where private companies pass insurance of high risk agents on to the public “partner”, arguing that this is a potentially important issue in such situations. In order to illustrate our concerns we look at the case of France. We build a simple model that incorporates the main features of the system, such as the uniform premium rate in both high and low risk regions and the existence of a state reinsurer. We show that in our model, risk selection is likely to be present at equilibrium and discuss the policy options available. When comparing with the actual situation in France we find that the “stylized facts” of the system correspond to our results. Additionally, the policies implemented by the government correspond to policies characterized to reduce the potential of risk selection.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mario Jametti & Thomas von Ungern-Sternberg, 2004.
"Disaster Insurance or a Disastrous Insturance - Natural Disaster Insurance in France,"
Department of Economics Working Papers
2004-13, McMaster University.
- Mario JAMETTI & Thomas VON UNGERN-STERNBERG, 2004. "Disaster Insurance or a Disastrous Insurance - Natural Disaster Insurance in France," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 04.12, Université de Lausanne, Faculté des HEC, DEEP.
- Mario Jametti & Thomas von Ungern-Sternberg, 2004. "Disaster Insurance or a Disastrous Insurance – Natural Disaster Insurance in France," CESifo Working Paper Series 1303, CESifo Group Munich.
- Yujing Shen & Randall P. Ellis, 2002. "How profitable is risk selection? A comparison of four risk adjustment models," Health Economics, John Wiley & Sons, Ltd., vol. 11(2), pages 165-174.
- Frame, David E., 2001. "Insurance and Community Welfare," Journal of Urban Economics, Elsevier, vol. 49(2), pages 267-284, March.
- Daniel Polsky & Sean Nicholson, 2004. "Why Are Managed Care Plans Less Expensive: Risk Selection, Utilization, or Reimbursement?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(1), pages 21-40.
- Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
- Lehmann, Hansjorg & Zweifel, Peter, 2004. "Innovation and risk selection in deregulated social health insurance," Journal of Health Economics, Elsevier, vol. 23(5), pages 997-1012, September.
- Sean Nicholson & Kate Bundorf & Rebecca M. Stein & Daniel Polsky, 2003. "The Magnitude and Nature of Risk Selection in Employer-Sponsored Health Plans," NBER Working Papers 9937, National Bureau of Economic Research, Inc.
- Christian Gollier, 2005. "Some Aspects of the Economics of Catastrophe Risk Insurance," CESifo Working Paper Series 1409, CESifo Group Munich.
- Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1683. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.