IDEAS home Printed from https://ideas.repec.org/a/kap/geneva/v31y2006i1p5-9.html
   My bibliography  Save this article

Optimal insurance contracts without the non-negativity constraint on indemnities: revisited

Author

Listed:
  • Michael Breuer

Abstract

In the literature on optimal indemnity schedules, indemnities are usually restricted to be non-negative. Keeler [1974] and Gollier [1987] show that this constraint might well bind: insured could get higher expected utility if insurance contracts would allow payments from the insured to the insurer at some losses. This paper extends Collier’s findings by allowing for negative indemnity payments for a broader class of insurers’ cost functions and argues that the indemnity schedule derived here is more appropriate for practical applications (e.g. in health insurance). Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Michael Breuer, 2006. "Optimal insurance contracts without the non-negativity constraint on indemnities: revisited," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 31(1), pages 5-9, July.
  • Handle: RePEc:kap:geneva:v:31:y:2006:i:1:p:5-9
    DOI: 10.1007/s10713-006-9463-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10713-006-9463-0
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10713-006-9463-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. MOSSIN, Jan, 1968. "Aspects of rational insurance purchasing," LIDAM Reprints CORE 23, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Sandrine Spaeter & Patrick Roger, 1997. "The Design of Optimal Insurance Contracts: A Topological Approach," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 22(1), pages 5-19, June.
    3. Gould, John P, 1969. "The Expected Utility Hypothesis and the Selection of Optimal Deductibles for a Given Insurance Policy," The Journal of Business, University of Chicago Press, vol. 42(2), pages 143-151, April.
    4. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. J François Outreville, 2010. "The Geneva Risk and Insurance Review 2009: In Quest of Behavioural Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(3), pages 484-497, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giora Harpaz, 1986. "Optimal Risk—Sharing Policies," The American Economist, Sage Publications, vol. 30(2), pages 37-40, October.
    2. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    3. Henri Loubergé, 1998. "Risk and Insurance Economics 25 Years After," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 23(4), pages 540-567, October.
    4. Kaluszka, Marek, 2004. "An extension of Arrow's result on optimality of a stop loss contract," Insurance: Mathematics and Economics, Elsevier, vol. 35(3), pages 527-536, December.
    5. Constantin Anghelache & Madalina Gabriela Anghel & Alexandru Ursache, 2015. "The Optimal Co-Insurance Model," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 305-308, December.
    6. Boonen, Tim J. & Liu, Fangda, 2022. "Insurance with heterogeneous preferences," Journal of Mathematical Economics, Elsevier, vol. 102(C).
    7. Ronny Klein, 2004. "Ansparen von Selbstbeteiligung in der Krankenversicherung?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(4), pages 510-521.
    8. Elisa Luciano, 1999. "A Note on Loadings and Deductibles: Can a Vicious Circle Arise?," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 1999(2), pages 157-169.
    9. Lu, Zhiyi & Meng, Shengwang & Liu, Leping & Han, Ziqi, 2018. "Optimal insurance design under background risk with dependence," Insurance: Mathematics and Economics, Elsevier, vol. 80(C), pages 15-28.
    10. Michael Breuer, 2005. "Multiple Losses, EX ANTE Moral Hazard, and the Implications for Umbrella Policies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(4), pages 525-538, December.
    11. Lin, Wen-chang & Lu, Jin-ray, 2012. "Risky asset allocation and consumption rule in the presence of background risk and insurance markets," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 150-158.
    12. Tridib Bandyopadhyay & Vijay Mookerjee, 0. "A model to analyze the challenge of using cyber insurance," Information Systems Frontiers, Springer, vol. 0, pages 1-25.
    13. Chi, Yichun & Zheng, Jiakun & Zhuang, Shengchao, 2022. "S-shaped narrow framing, skewness and the demand for insurance," Insurance: Mathematics and Economics, Elsevier, vol. 105(C), pages 279-292.
    14. Y.M. Ermoliev & S.D. Flam, 2000. "Finding Pareto Optimal Insurance Contracts," Working Papers ir00033, International Institute for Applied Systems Analysis.
    15. Neil A. Doherty & Christian Laux & Alexander Muermann, 2015. "Insuring Nonverifiable Losses," Review of Finance, European Finance Association, vol. 19(1), pages 283-316.
    16. Flåm, Sjur Didrik, 2002. "Full Coverage for Minor, Recurrent Losses?," Working Papers in Economics 10/02, University of Bergen, Department of Economics.
    17. Chi, Yichun & Zhuang, Sheng Chao, 2022. "Regret-based optimal insurance design," Insurance: Mathematics and Economics, Elsevier, vol. 102(C), pages 22-41.
    18. Martin Feldstein & Jonathan Gruber, 1995. "A Major Risk Approach to Health Insurance Reform," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 103-130, National Bureau of Economic Research, Inc.
    19. Segal, Uzi & Spivak, Avia, 1990. "First order versus second order risk aversion," Journal of Economic Theory, Elsevier, vol. 51(1), pages 111-125, June.
    20. Chi, Yichun & Tan, Ken Seng & Zhuang, Sheng Chao, 2020. "A Bowley solution with limited ceded risk for a monopolistic reinsurer," Insurance: Mathematics and Economics, Elsevier, vol. 91(C), pages 188-201.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:geneva:v:31:y:2006:i:1:p:5-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.