Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-23T14:50:33.786Z Has data issue: false hasContentIssue false
  • English
  • Français

Optimal Insurance Coverage under Bonus-Malus Contracts

Published online by Cambridge University Press:  29 August 2014

Jon Holtan
Jon Holtan*
Affiliation:
if P&C Insurance Ltd., Oslo, Norway
*
if P&C Insurance Ltd., P.O. Box 1340 Vika, N-0114 Oslo, Norway
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

The paper analyses the questions: Should – or should not – an individual buy insurance? And if so, what insurance coverage should he or she prefer? Unlike classical studies of optimal insurance coverage, this paper analyses these questions from a bonus-malus point of view, that is, for insurance contracts with individual bonus-malus (experience rating or no-claim) adjustments. The paper outlines a set of new statements for bonus-malus contracts and compares them with corresponding classical statements for standard insurance contracts. The theoretical framework is an expected utility model, and both optimal coverage for a fixed premium function and Pareto optimal coverage are analyzed. The paper is an extension of another paper by the author, see Holtan (2001), where the necessary insight to – and concepts of – bonus-malus contracts are outlined.

Keywords

Insurance contractsbonus-malusoptimal insurance coveragedeductiblesutility theoryPareto optimality
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 31 , Issue 1 , May 2001 , pp. 175 - 186
Copyright
Copyright © International Actuarial Association 2001

References

REFERENCES

Aase, K.K. (1993) Equilibrium in a reinsurance syndicate; Existence, uniqueness and characterization. ASTIN Bulletin 23, 185–211.CrossRefGoogle Scholar
Arrow, K.J. (1974) Optimal insurance and generalized deductibles. Skandinavisk Aktuarietidsskrift, 1–42.Google Scholar
Borch, K.H. (1990) Economics of Insurance. Advanced Textbooks in Economics Series. (Editors: Aase, Knut K. and Sandmo, Agnar), North Holland; Amsterdam, New York, Oxford, Tokyo.Google Scholar
Holmström, B. (1979) Moral hazard and observability. The Bell Journal of Economics 10, 74–91.CrossRefGoogle Scholar
Holtan, J. (1994) Bonus Made Easy. ASTIN Bulletin 24, 61–74.CrossRefGoogle Scholar
Holtan, J. (2001) Optimal Loss Financing under Bonus-Malus Contracts. This volume of ASTIN Bulletin.Google Scholar
Mossin, J. (1968) Aspects of rational insurance purchasing. Journal of Political Economy 76, 553–568.CrossRefGoogle Scholar
Raviv, A. (1979) The design of an optimal insurance policy. American Economic Review 69, 84–96.Google Scholar
Rothschild, M. and Stiglitz, J. (1976) Equilibrium in competitive insurance markets. An essay on the economics of imperfect information. Quarterly Journal of Economics 90, 629–650.CrossRefGoogle Scholar