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Loss coverage in insurance markets: why adverse selection is not always a bad thing

Hao, MingJie, Tapadar, Pradip, Thomas, R. Guy (2015) Loss coverage in insurance markets: why adverse selection is not always a bad thing. In: International Actuarial Association Colloquium, 7-10 June 2015, Oslo, Norway. (KAR id:64112)

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Abstract

This paper investigates equilibrium in an insurance market where risk classification is restricted. Insurance demand is characterised by an iso-elastic function with a single elasticity

by insurance. We find that equilibrium premium and adverse selection increase monotonically with demand elasticity, but loss coverage first increases and then decreases. We argue that

loss coverage represents the efficacy of insurance for the whole population; and therefore, if demand elasticity is sufficiently low, adverse selection is not always a bad thing.

Item Type: Conference or workshop item (Paper)
Subjects: Q Science > QA Mathematics (inc Computing science)
Divisions: Faculties > Sciences > School of Mathematics Statistics and Actuarial Science
Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Actuarial Science
Depositing User: Pradip Tapadar
Date Deposited: 20 Oct 2017 20:52 UTC
Last Modified: 29 May 2019 19:44 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/64112 (The current URI for this page, for reference purposes)
Tapadar, Pradip: https://orcid.org/0000-0003-0435-0860
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