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Equitable Insurance Premium Schemes

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  • W. Bossert
  • M. Fleurbaey

Abstract

We analyze the equity properties of insurance premium schemes where agents are partitioned into groups with different average accident probabilities and each individual has to pay a premium according to the average probability of the group to which it belongs. In particular, we examine the question whether choosing finer partitions to define these groups generates more equitable situations than coarser groups. Though it turns out that partitioning the agents into finer groups can never be Lorenz dominated by the coarser partition, it cannot be guaranteed that finer partitions represent improvements over coarser ones except in very restrictive circumstances.
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Suggested Citation

  • W. Bossert & M. Fleurbaey, 2000. "Equitable Insurance Premium Schemes," THEMA Working Papers 2000-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2000-03
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    File URL: http://www.u-cergy.fr/IMG/documents//2000-03fleur.pdf
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    Cited by:

    1. Satya R. Chakravarty & Claudio Zoli, 2019. "Stochastic Dominance Relations for Integer Variables," Themes in Economics, in: Satya R. Chakravarty (ed.), Poverty, Social Exclusion and Stochastic Dominance, pages 211-222, Springer.
    2. Michael Hoy & Julia Witt, 2007. "Welfare Effects of Banning Genetic Information in the Life Insurance Market: The Case of BRCA1/2 Genes," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 523-546, September.
    3. Aboudi, Ronny & Thon, Dominique, 2006. "Refinements of Muirhead's Lemma and income inequality," Mathematical Social Sciences, Elsevier, vol. 51(2), pages 201-216, March.
    4. Marc Fleurbaey, 2014. "The facets of exploitation," Journal of Theoretical Politics, , vol. 26(4), pages 653-676, October.
    5. Yann Braouezec, 2015. "Public versus Private Insurance System with (and without) Transaction Costs: Optimal Segmentation Policy of an Informed monopolistPublic versus Private Insurance System with (and without) Transaction ," Working Papers 2013-ECO-23, IESEG School of Management, revised May 2014.
    6. Michael Hoy & Michael Ruse, 2005. "Regulating Genetic Information in Insurance Markets," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 8(2), pages 211-237, September.
    7. Michael Hoy & Michael Ruse, 2008. "“No Solution to This Dilemma Exists”: Discrimination, Insurance, and the Human Genome Project," Working Papers 0808, University of Guelph, Department of Economics and Finance.

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