Optimal Claim Settlement Strategies under Constraint of Cap on Claim Loss

Hong Mao and Krzysztof Ostaszewski
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Hong Mao: School of Economics and Management, Shanghai Second Polytechnic University, Shanghai 201209, China
Krzysztof Ostaszewski: Department of of Mathematics, Illinois State University, Normal, IL 61790-4520, USA

Mathematics, 2021, vol. 9, issue 24, 1-12

Abstract: In this paper, we examine the question of how to devise an optimal insurance claim settlement scheme under the constraint of a cap on the amount of the claim payment. We establish objective functions to maximize the net benefit due to exaggerated claims while at the same time maximizing the total expected wealth of the insured. Then, we establish a dual objective function to minimize the total expected loss, including the perspective of the insurer. Finally, we illustrate applications of our work and provide numerical analysis of it along with an example.

Keywords: insurance contract; insurance claim; claim cap; insured loss (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
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