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Full Coverage for Minor, Recurrent Losses?

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Abstract

This note looks at insurance of minor, recurrent losses. The main concern is with efficiency properties of full coverage. As motivation and running example we concider a regime, currently operative in several European countries, that offers employees complete wage reimbursement during short spell sickness. Assembled here are some arguments speaking against this sort of insurance policy.

Suggested Citation

  • Flåm, Sjur Didrik, 2002. "Full Coverage for Minor, Recurrent Losses?," Working Papers in Economics 10/02, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2002_010
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    File URL: http://ekstern.filer.uib.no/svf/2002/10-02.pdf
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    References listed on IDEAS

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    1. Doherty, Neil A & Schlesinger, Harris, 1983. "Optimal Insurance in Incomplete Markets," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1045-1054, December.
    2. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614, Elsevier.
    3. Baton, Bernard & Lemaire, Jean, 1981. "The Core of a Reinsurance Market," ASTIN Bulletin, Cambridge University Press, vol. 12(1), pages 57-71, June.
    4. MOSSIN, Jan, 1968. "Aspects of rational insurance purchasing," LIDAM Reprints CORE 23, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    6. LeRoy,Stephen F. & Werner,Jan, 2014. "Principles of Financial Economics," Cambridge Books, Cambridge University Press, number 9781107024120, February.
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    More about this item

    Keywords

    risk sharing; coinsurance; deductible; non-insurable risk; Pareto efficiency; mutual insurance; arbitrage; adverse selection; moral hazard.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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