Risk Classification and Social Welfare&ast

Michael Hoy

The Geneva Papers on Risk and Insurance - Issues and Practice, 2006, vol. 31, issue 2, 245-269

Abstract: In this paper, I provide a selective survey of the literature on the social welfare implications of regulations that restrict insurers' use of classification by personal characteristics. I refer to this practice as regulatory adverse selection. To differentiate this survey from earlier ones, I focus on directly addressing the question “What can canonical models of insurance tell us about policy effects of restrictions on risk classification?” Rather than only focus on efficiency properties of such regulations, I adopt an explicit welfare function approach of the sort inspired by Harsanyi's veil of ignorance. This allows for an explicit trade-off concerning the equity and efficiency effects of regulatory adverse selection. Also, I pay more attention than do earlier surveys to the possibility of pooling equilibria under nonexclusivity of provision and additional considerations that specifically affect the life insurance market. I derive some explicit conditions that determine when such regulations are either welfare enhancing or detrimental. The Geneva Papers (2006) 31, 245–269. doi:10.1057/palgrave.gpp.2510079

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.palgrave-journals.com/gpp/journal/v31/n2/pdf/2510079a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/gpp/journal/v31/n2/full/2510079a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

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:pal:gpprii:v:31:y:2006:i:2:p:245-269

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().