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Long Term Insurance (LTI) for Addressing Catastrophe Risk

Dwight Jaffee, Howard Kunreuther and Erwann Michel-Kerjan

No 14210, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper proposes long-term insurance (LTI) as an alternative to the standard annual homeowners policy using lessons from the mortgage market as a benchmark. LTI has the potential to significantly increase social welfare by reducing insurers' administrative costs, lowering search costs and uncertainty for consumers and providing incentives for long-term investment in mitigation measures to protect property. A two-period model illustrates situations that would make a long-term contract attractive to both insurers and consumers under competitive market conditions.

JEL-codes: G1 G2 G22 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-ias
Note: PE
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