Review of Finance Vol. 19 No. 1 2015
Insuring Nonverifiable Losses
open access
Abstract
Insurance contracts are often complex and difficult to verify outside the insurance relation. We show that standard one-period insurance policies with an upper limit and a deductible are the optimal incentive-compatible contracts in a competitive market with repeated interaction. Optimal group insurance policies involve a joint upper limit and individual deductibles; insurance brokers can play a role implementing such contracts for their clients. Our model provides new insights and predictions about the determinants of insurance.
- DOI
- 10.1093/rof/rft056
- Volume
- 19
- Issue
- 1
- Pages
- 283-316
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref