Self-insurance and market insurance substitutability: an established tenet reconsidered

Substituabilité de l'auto-assurance et de l'assurance de marché: un principe établi reconsidéré

Jean-Marc Bourgeon and Pierre Picard

Working Papers from HAL

Abstract: We analyze the interaction between self-insurance and market insurance when accident losses are multivalued. We show that self-insurance and market insurance may be complementary when self-insurance expenses do not affect much the probability distribution of large losses and the loading factor is high. This contrasts sharply with the conclusion of Ehrlich and Becker (1972) who establish the substitutability between self-insurance and market insurance when the cost of an accident is single-valued. The results are derived theoretically and illustrated through numerical simulations.

Keywords: insurance; self-insurance; contracts; Assurance; Contrat assurance; Auto-assurance (search for similar items in EconPapers)
Date: 2024-01-17
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