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A Game‐Theoretical Interpretation of Guaranteed Renewability in Health Insurance

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  • Salam Abdus

Abstract

A game‐theoretical model is developed here that can explain why the premiums of the health insurance contracts in the individual health insurance market do not vary that much over time, even in absence of any legal restriction on premiums. In this model the insurer and the individuals interact for an infinite number of periods, and the threats of punishments in case of deviations force both the insurer and the individuals to stay on a constant premium path. This model, unlike the other models of guaranteed renewability, does not presume commitment of the insurer.

Suggested Citation

  • Salam Abdus, 2010. "A Game‐Theoretical Interpretation of Guaranteed Renewability in Health Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 13(2), pages 195-206, September.
    • Handle: RePEc:bla:rmgtin:v:13:y:2010:i:2:p:195-206
    DOI: j.1540-6296.2010.01182.x
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    References listed on IDEAS

    as
    1. Pauly, Mark V & Kunreuther, Howard & Hirth, Richard, 1995. "Guaranteed Renewability in Insurance," Journal of Risk and Uncertainty, Springer, vol. 10(2), pages 143-156, March.
    2. Pauly, Mark & Nickel, Andreas & Kunreuther, Howard, 1998. "Guaranteed Renewability with Group Insurance," Journal of Risk and Uncertainty, Springer, vol. 16(3), pages 211-221, July-Aug..
    3. Frick, Kevin D, 1998. "Consumer Capital Market Constraints and Guaranteed Renewable Insurance," Journal of Risk and Uncertainty, Springer, vol. 16(3), pages 271-278, July-Aug..
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