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How can adverse selection increase social welfare?

Tapadar, Pradip (2019) How can adverse selection increase social welfare? In: Actuarial Teachers' and Researchers' Conference, 27-28 Jun 2019, Liverpool, UK. (KAR id:74568)

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Abstract

This talk will focus on the effects of bans on insurance risk classification on utilitarian social welfare. We consider two regimes: full risk classification, where insurers charge the actuarially fair premium for each risk; and pooling, where risk classification is banned and for institutional or regulatory reasons, insurers do not attempt to separate risk classes, but charge a common premium for all risks. For the case of iso-elastic insurance demand, we derive sufficient conditions on higher and lower risks' demand elasticities which ensure that utilitarian social welfare is higher under pooling than under full risk classification. Empirical evidence suggests that these conditions may be realistic for some insurance markets.

Item Type: Conference or workshop item (Lecture)
Subjects: Q Science > QA Mathematics (inc Computing science)
Divisions: Divisions > Division of Computing, Engineering and Mathematical Sciences > School of Mathematics, Statistics and Actuarial Science
Depositing User: Pradip Tapadar
Date Deposited: 25 Jun 2019 09:11 UTC
Last Modified: 16 Feb 2021 14:05 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/74568 (The current URI for this page, for reference purposes)
Tapadar, Pradip: https://orcid.org/0000-0003-0435-0860
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