Personal non-life insurance decisions and the welfare loss from flat deductibles
Research output: Contribution to journal › Journal article › Research › peer-review
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Personal non-life insurance decisions and the welfare loss from flat deductibles. / Steffensen, Mogens; Thøgersen, Julie.
In: ASTIN Bulletin, Vol. 49, No. 1, 2019, p. 85-116.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Personal non-life insurance decisions and the welfare loss from flat deductibles
AU - Steffensen, Mogens
AU - Thøgersen, Julie
PY - 2019
Y1 - 2019
N2 - We view the retail non-life insurance decision from the perspective of the insured. We formalize different consumption-insurance problems depending on the flexibility of the insurance contract. For exponential utility and power utility we find the optimal flexible insurance decision or insurance contract. For exponential utility we also find the optimal position in standard contracts that are less flexible and therefore, for certain nonlinear pricing rules, lead to a welfare loss for the individual insuree compared to the optimal flexible insurance decision. For the exponential loss distribution, we quantify a significant welfare loss. This calls for product development in the retail insurance business.
AB - We view the retail non-life insurance decision from the perspective of the insured. We formalize different consumption-insurance problems depending on the flexibility of the insurance contract. For exponential utility and power utility we find the optimal flexible insurance decision or insurance contract. For exponential utility we also find the optimal position in standard contracts that are less flexible and therefore, for certain nonlinear pricing rules, lead to a welfare loss for the individual insuree compared to the optimal flexible insurance decision. For the exponential loss distribution, we quantify a significant welfare loss. This calls for product development in the retail insurance business.
KW - compound Poisson loss process
KW - Exponential utility
KW - HJB equation
KW - insurance pricing
KW - product design
UR - http://www.scopus.com/inward/record.url?scp=85062351460&partnerID=8YFLogxK
U2 - 10.1017/asb.2019.40
DO - 10.1017/asb.2019.40
M3 - Journal article
AN - SCOPUS:85062351460
VL - 49
SP - 85
EP - 116
JO - ASTIN Bulletin: The Journal of the IAA
JF - ASTIN Bulletin: The Journal of the IAA
SN - 0515-0361
IS - 1
ER -
ID: 235073183