Risk Classification with On-Demand Insurance

Alexander Braun, Niklas Häusle and Paul D. Thistle
Additional contact information
Alexander Braun: University of St. Gallen; Swiss Finance Institute
Niklas Häusle: University of St. Gallen
Paul D. Thistle: University of Nevada, Las Vegas

No 23-49, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: On-demand insurance is an innovative business model from the InsurTech space, which provides coverage for episodic risks. It makes use of a simple fact in a practical way: People differ in their frequency of exposure as well as the probability of loss. The extra dimension of heterogeneity can be used to screen the insured and shifts the utility-possibility frontier outwards. We provide a sufficient condition under which type-specific full insurance at the actuarially fair price is incentive compatible. We also show that our results hold for various real-world implementations of on-demand insurance.

Keywords: adverse selection; efficiency; risk classification; insurance; insurtech; business models (search for similar items in EconPapers)
JEL-codes: D82 D86 G22 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023-06
New Economics Papers: this item is included in nep-rmg and nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2349

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