Influence of precaution and dynamic post-indemnity based insurance policy on controlling the propagation of epidemic security risks in networks

Guang-Hai Cui, Zhen Wang, Jun-Li Li, Xing Jin and Zhi-Wang Zhang

Applied Mathematics and Computation, 2021, vol. 392, issue C

Abstract: This paper studies how the purchase of insurance policies against epidemic security risks, a voluntary strategy of individuals, impacts the controlling of epidemic security risk propagation in networks and the profit of the insurer. For this purpose, we first formulated a modified agent-based framework that characterizes the coupled dynamics of individual security-protection investment behaviors and epidemic security risk propagation process, to study the effectiveness of insurance policies. Second, we proposed a novel insurance policy that follows the designed “precaution and dynamic post-indemnity” (PDPI) principle, taking the correlated and interdependent characteristics of epidemic security risks into account. We determined how the PDPI insurance policy affects security-protection investment coverage and epidemiological dynamics by tuning the allocation coefficient of insurance funds α and the ratio between the premium and the cost of investment R. The results indicated that, although insurance policies have negative influences on voluntary investment behaviors, the risk propagation can be controlled effectively by appropriate combination of α and R, because the precaution mechanism in the PDPI insurance policy can counteract this side effect by guaranteeing the security-protection investment coverage among insured individuals with larger degrees. We further found that, although the insurance policy cannot lead to the maximal profit when the policy has the best performance on risk propagation prevent, the insurer still can earn positive profits. Finally, some effective PDPI insurance policies against specific investment costs are given. The models and findings shed new and meaningful insights into designing and measuring effective insurance policies associated with security-protection investment in controlling the propagation of epidemic security risks.

Keywords: Security-protection investment; Epidemic security risk; Insurance policy; Precaution and dynamic post-indemnity (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0096300320306731
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:392:y:2021:i:c:s0096300320306731

DOI: 10.1016/j.amc.2020.125720

Access Statistics for this article

Applied Mathematics and Computation is currently edited by Theodore Simos

More articles in Applied Mathematics and Computation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().