Insurance Markets With Differential Information

S. Hun Seog

Journal of Risk & Insurance, 2009, vol. 76, issue 2, 279-294

Abstract: This article attempts to understand the outcomes when each party of an insurance contract simultaneously has superior information. I assume that policyholders have superior information about specific risks while insurers have superior information about general risks. I find that low‐general‐risk policyholders purchase insurance, while high‐general‐risk policyholders are self‐insured. Among the low‐general‐risk policyholders, high‐specific‐risk policyholders purchase full insurance, while low‐specific‐risk policyholders purchase partial insurance. When insurers can strategically publicize their information, efficiency is improved because high‐general‐risk policyholders purchase actuarially fair insurance. The market segmentation is also found based on the general‐risk type and the publicizing of information.

Date: 2009
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https://doi.org/10.1111/j.1539-6975.2009.01299.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:76:y:2009:i:2:p:279-294

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