Insurance loss coverage and social welfare

Hao, MingJie and Macdonald, Angus S. and Tapadar, Pradip and Thomas, R. Guy (2018) Insurance loss coverage and social welfare. Working paper. Unknown (Unpublished) (Full text available)

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Abstract

Restrictions on insurance risk classifi�cation may induce adverse selection, which is usually perceived as a bad outcome, both for insurers and for society. However, a social benefi�t of modest adverse selection is that it can lead to an increase in `loss coverage', defined as expected losses compensated by insurance for the whole population. We reconcile the concept of loss coverage to a utilitarian concept of social welfare commonly found in economic literature on risk classification. For iso-elastic insurance demand, ranking risk classification schemes by (observable) loss coverage always gives the same ordering as ranking by (unobservable) social welfare.

Item Type: Monograph (Working paper)
Uncontrolled keywords: Adverse selection, loss coverage; social welfare
Subjects: Q Science > QA Mathematics (inc Computing science)
Divisions: Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Actuarial Science
Depositing User: Pradip Tapadar
Date Deposited: 18 Feb 2016 13:29 UTC
Last Modified: 02 May 2018 13:28 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/54235 (The current URI for this page, for reference purposes)
Tapadar, Pradip: https://orcid.org/0000-0003-0435-0860
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