Prevention incentives in long-term insurance contracts

Renaud Bourlès ()

Working Papers from HAL

Abstract: Long-term insurance contracts are widespread, particularly in public health and the labor market. Such contracts typically involve monthly or annual premia which are related to the insured's risk profile. A given profile may change, based on observed outcomes which depend on the insured's prevention efforts. The aim of this paper is to analyze the latter relationship. In a two-period optimal insurance contract in which the insured's risk profile is partly governed by her effort on prevention, we find that both the insured's risk aversion and prudence play a crucial role. If absolute prudence is greater than twice absolute risk aversion, moral hazard justifies setting a higher premium in the first period but also greater premium discrimination in the second period. This result provides insights on the trade-offs between long-term insurance and the incentives arising from risk classification, as well as between inter- and intragenerational insurance.

Keywords: Economie; quantitative (search for similar items in EconPapers)
Date: 2025-05-20
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01589993v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://amu.hal.science/hal-01589993v1/document (application/pdf)

Related works:
Journal Article: Prevention incentives in long‐term insurance contracts (2017)
Working Paper: Prevention Incentives in Long-Term Insurance Contracts (2015)
Working Paper: Prevention Incentives in Long-Term Insurance Contracts (2015)
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:hal:wpaper:hal-01589993

DOI: 10.1111/jems.12196

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().