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Can adverse selection increase social welfare?

Tapadar, Pradip (2020) Can adverse selection increase social welfare? In: Heriot-Watt University Seminar Series, 5 February 2020, Heriot-Watt University. (Unpublished) (KAR id:79933)

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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)
Uncontrolled keywords: Social welfare; elasticity of demand; adverse selection; insurance risk classification.
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: 03 Feb 2020 20:40 UTC
Last Modified: 16 Feb 2021 14:11 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/79933 (The current URI for this page, for reference purposes)
Tapadar, Pradip: https://orcid.org/0000-0003-0435-0860
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