The Optimal Co-Insurance Model

Co-insurance is a concept defined by several people as simultaneously insurance in the amount deposited in advance warranty. In the present article we shall consider a risk averse agent with an initial wealth that supports a risk of loss. Supposing that for every euro paid as damages by the insurance policy, the insurer incurrs a one-off transaction costs. Obviously, more complex structures are also possible cost. If we add these transaction costs to the expected costs of damage in the first plan insurance payments must be equal. Level λ is often considered as an influential factor or source of profit and loss. So, if spending rises to 10 lei for every 100 lei of the damage, the insurer will add 10% to competitive actuarial value of an insurance policy in order to cover these expenses.