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On insurance contract design for low probability events

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  • Eric Langlais

Abstract

This paper extends the analysis of insurance contracts design to the case of "low probability events", when there is a probability mass on the event "no accident-zero loss". The optimality of the deductible clause is discussed both at the theoretical and empirical levels.

Suggested Citation

  • Eric Langlais, 2008. "On insurance contract design for low probability events," EconomiX Working Papers 2008-33, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2008-33
    as

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    File URL: http://economix.fr/pdf/dt/2008/WP_EcoX_2008-33.pdf
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    References listed on IDEAS

    as
    1. Cummins, J David & Mahul, Olivier, 2003. "Optimal Insurance with Divergent Beliefs about Insurer Total Default Risk," Journal of Risk and Uncertainty, Springer, vol. 27(2), pages 121-138, October.
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    4. John David Cummins & Olivier Mahul, 2003. "Optimal insurance with divergent beliefs about total default risk," Post-Print hal-01952121, HAL.
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    8. G. Carlier & R.A. Dana & N. Shahidi, 2003. "Efficient Insurance Contracts under Epsilon-Contaminated Utilities," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 28(1), pages 59-71, June.
    9. Johnson, Eric J & Hershey, John & Meszaros, Jacqueline & Kunreuther, Howard, 1993. "Framing, Probability Distortions, and Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 35-51, August.
    10. Gollier, Christian & Schlesinger, Harris, 1996. "Arrow's Theorem on the Optimality of Deductibles: A Stochastic Dominance Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 359-363, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Optimal insurance design; low probability events; insurance coverage for catastrophic risks;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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