Arbeitspapier
Time, Risk, Precommitment, and Adverse Selection in Competitive Insurance Markets
This informal paper explores models of competitive insurance market equilibrium when individuals of initially similar apparent risk experience divergence in risk levels over time. The information structure is modeled in three alternative ways: all insurers and insureds know risk at any point in time, current insurer and insured know risk, and only the individual knows risk. Insurers always know the average risk. It is shown that some models lead to backloading of premiums in which initial premiums are less than initial period expected expense, and that other models lead to frontloading of premiums and policy provisions of guaranteed renewability. Finally, it is shown that guaranteed renewability greatly reduces the possibility of adverse selection.
- Language
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Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 1068
- Classification
-
Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Pauly, Mark V.
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2003
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Pauly, Mark V.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2003
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