Full Insurance Research Articles

Continuous-Time Optimal Reporting with Full Insurance under the Mean-Variance Criterion

Continuous-Time Optimal Reporting with Full Insurance under the Mean-Variance Criterion

Legal Evaluation of Premium Payment as a Condition Precedent for a Valid Insurance Contract

The idea of insurance is widely recognized in commercial law and has evolved into a fundamental tenet of contemporary business dealings and contracts. It was designed to satisfy the requirements of contracting parties and has been supported as a workable and commercial tool that an insured can use to reasonably mitigate the effects of a disaster or other occurrence by purchasing an insurance policy. A service known as insurance exchanges risk for monetary responsibilities known as premiums. It is not uncommon for an insured party, before the advent of Insurance Decree 1997 after negotiating and executing an insurance policy, to defer payment of premium until a later date; or for insurance companies to accept part payment of premium, on the condition that payment would be made in full before the end of the insurance policy period. This position changed with the provision of ‘no premium no cover’ under Section 37 of the Insurance Decree, 1997. In an action for enforcement of a contract, the party who alleges breach must prove the existence and validity of a contract between him and the other party. A very important ingredient of the insurance contract is consideration; that is, for a contract to be valid, something of some value, e.g. money or services, must be exchanged for the promise under the contract. Offer and acceptance refers to an offer being made and then being accepted by the other party. Fulfilment of this legal requirement implies that negotiations have been settled and parties have come to an agreement. Current study examined and evaluated premium payment of premiums as a prerequisite to enforceable insurance agreements and claims. It revealed that payment of full insurance premiums is imperative if a contract of insurance is legal and enforceable under section 50(1) of the 2003 Insurance Act. Also, it will be unreasonable and unjustifiable for an insured to be expecting indemnity when a full premium has not been paid to the insurer for proper coverage.

Bilateral trade with loss-averse agents

AbstractWe introduce expectations-based loss aversion, which can explain the empirically well-documented endowment and attachment effect, into the classical bilateral-trade setting (Myerson and Satterthwaite in J. Econ. Theory 29:265–281, 1983). We derive optimal mechanisms for different objectives and find that relative to no loss aversion, the platform designer optimally provides agents with partial insurance in the ownership dimension and with full insurance in the money dimension. Notably, the former is achieved either by increasing or decreasing the trade frequency, depending on the distribution of types. Finally, we show that the impossibility of inducing materially efficient trade persists with loss aversion.

South Carolina Soybean Research Widens Full Coverage Crop Insurance Window

South Carolina Soybean Research Widens Full Coverage Crop Insurance Window

Long‐term care and myopia: Optimal linear subsidies for private insurance

AbstractThis paper studies optimal linear policy directed at private long‐term care insurance in the context where individuals are myopic, that is, underestimate their dependency risk. Without government intervention, myopic individuals underinsure, while the first‐best optimum requires full insurance. To decentralize the first‐best, one needs personalized linear subsidies on private insurance premiums combined with personalized lump‐sum taxes to finance these subsidies and redistribute resources among individuals. In the second‐best setting where only uniform instruments can be used, the determination of the optimal insurance subsidy rate includes three main considerations: standard efficiency concern, correction for myopia, and redistributive concerns. While the correction for myopia pushes for a higher subsidy rate, the analysis of the redistributive concerns is far less straightforward. Overall, the redistributive concerns depend on three main factors: whether wealthier individuals are less myopic, how the probability of dependency varies with wealth and what is the type of absolute risk aversion exhibited by individual preferences.

Equity in oncology care: addressing disparities in cancer treatment in Georgia.

This research delves into the disparities in access to oncology care among cancer patients in Georgia, with a specific focus on the distinct challenges faced by African American (AA) individuals compared to non-African American (Non-AA) counterparts. Leveraging data from the 2020 Behavioral Risk Factor Surveillance System (BRFSS) survey and supplementary online resources, the study meticulously examines socioeconomic factors, including income, education, and insurance coverage, which significantly influence the quality of cancer care received. The analysis reveals substantial income gaps between AA and Non-AA patients, underscoring the critical implications for healthcare access. Moreover, AA patients exhibit lower rates of full insurance coverage for cancer-related treatments, posing additional barriers to comprehensive care. By investigating the intersections of race, income, and education, the research aims to pinpoint the root causes of these disparities and proposes evidence-based solutions to address the identified challenges. The ultimate objective is to contribute valuable insights that inform targeted policy recommendations and community-based interventions, fostering a more equitable landscape for oncology care in Georgia. This study seeks to amplify awareness and advocate for tangible measures, striving toward healthcare equity for all cancer patients, irrespective of their racial or socioeconomic backgrounds.

On Correlation Aversion and Insurance Demand

This is a study of decision problems under two-dimensional risk. We use an existing index of absolute correlation aversion to conveniently classify bivariate preferences, with respect to attitudes toward this risk. This classification seems to be more important than whether decision makers are correlation-averse or correlation-seeking for the study of insurance demand when a loss has a multidimensional impact. On this note, we also re-examine Mossin’s theorem under bivariate preferences, where full insurance is preferred with a fair premium, while less than full coverage is preferred with a proportional premium loading. Furthermore, based on the comparative statics of this two-dimensional insurance model for changes in correlation aversion, we derive testable implications about the classification of bivariate utility functions. For the particular case when the two-dimensional risk can be interpreted as risk on income and health, we identify the form of separable utility functions depending on health status and income that is consistent with household disability insurance decisions.

Comparing Insulin Against Glucagon-Like Peptide-1 Receptor Agonists, Dipeptidyl Peptidase-4 Inhibitors, and Sodium-Glucose Cotransporter 2 Inhibitors on 5-Year Incident Heart Failure Risk for Patients With Type 2 Diabetes Mellitus: Real-World Evidence Study Using Insurance Claims.

Type 2 diabetes mellitus (T2DM) is a common health issue, with heart failure (HF) being a common and lethal long-term complication. Although insulin is widely used for the treatment of T2DM, evidence regarding the efficacy of insulin compared to noninsulin therapies on incident HF risk is missing among randomized controlled trials. Real-world evidence on insulin's effect on long-term HF risk may supplement existing guidelines on the management of T2DM. This study aimed to compare insulin therapy against other medications on HF risk among patients with T2DM using real-world data extracted from insurance claims. A retrospective, observational study was conducted based on insurance claims data from a single health care network. The study period was from January 1, 2016, to August 11, 2021. The cohort was defined as patients having a T2DM diagnosis code. The inclusion criteria were patients who had at least 1 record of a glycated hemoglobin laboratory test result; full insurance for at least 1 year (either commercial or Medicare Part D); and received glucose-lowering therapy belonging to 1 of the following groups: insulin, glucagon-like peptide 1 receptor agonists (GLP-1 RAs), dipeptidyl peptidase-4 inhibitors (DPP-4Is), or sodium-glucose cotransporter-2 inhibitors (SGLT2Is). The main outcome was the 5-year incident HF rate. Baseline covariates, including demographic characteristics, comorbidities, and laboratory test results, were adjusted to correct for confounding. After adjusting for a broad list of confounders, patients receiving insulin were found to be associated with an 11.8% (95% CI 11.0%-12.7%), 12.0% (95% CI 11.5%-12.4%), and 15.1% (95% CI 14.3%-16.0%) higher 5-year HF rate compared to those using GLP-1 RAs, DPP-4Is, and SGLT2Is, respectively. Subgroup analysis showed that insulin's effect of a higher HF rate was significant in the subgroup with high HF risk but not significant in the subgroup with low HF risk. This study generated real-world evidence on the association of insulin therapy with a higher 5-year HF rate compared to GLP-1 RAs, DPP-4Is, and SGLT2Is based on insurance claims data. These findings also demonstrated the value of real-world data for comparative effectiveness studies to complement established guidelines. On the other hand, the study shares the common limitations of observational studies. Even though high-dimensional confounders are adjusted, remaining confounding may exist and induce bias in the analysis.

Optimal Loss Reporting in Continuous Time with Full Insurance

Optimal Loss Reporting in Continuous Time with Full Insurance

A Methodical Approach to Determining the Full Cost Insurance Protection of the Enterprise with Business Risks Coverage

A Methodical Approach to Determining the Full Cost Insurance Protection of the Enterprise with Business Risks Coverage

Study on Full Cost Insurance and Plantation Income Insurance to Promote the Construction of Agricultural Power

Study on Full Cost Insurance and Plantation Income Insurance to Promote the Construction of Agricultural Power

Insurance Contracting with Adverse Selection and Moral Hazard

Most of the previous research in the asymmetric information problem treats adverse selection and moral hazard separately, though they may coexist and interact with each other. We build a principal-agent model to examine optimal contracts in a competitive insurance market facing adverse selection and moral hazard simultaneously. We apply the change-of-variable method and the Kuhn-Tucker conditions to solve the optimization programs. Our model yields richer separating Nash equilibria than pure moral hazard and pure adverse selection models, although separating Nash equilibria may not exist in some cases. It also retains some properties, for example, no full insurance and the positive correlation between insurance coverage and risk type, in those benchmark models. Our study on comparative statics indicates that, under some conditions and with some exceptions, the optimal indemnity and premium decrease with disutility from effort, increase with potential loss, and decrease with the initial wealth of the insured.

The Impact of Health Risks on Individual Decision Making: Focusing on the Demand for Insurance and Risky Assets

This study examines the impact of health and health risks on individuals' decision-making using a bivariate utility function, where the level of utility depends on both wealth and health. The findings are as follows, first, partial insurance may be optimal even under an actuarially fair insurance premium. Conversely, full insurance or over insurance may be optimal, even under an actuarially unfavorable premium. Second, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks, independent of losses, increases the demand for insurance. Third, correlation-loving individuals reduce their investment in risky assets as health deteriorates when their preference exhibits decreasing absolute risk aversion (DARA) in wealth and absolute risk aversion (ARA) in wealth is sufficiently large. Conversely, correlation-averse individuals reduce their investment in risky assets as health deteriorates when their preference for DARA and ARA in wealth is sufficiently small. Fourth, when the utility function exhibits cross-risk vulnerability toward health, the presence of unfair health risks independent of the returns of risky assets reduces the demand for those assets.

The dual role of insurance in input use: Mitigating risk versus curtailing incentives

Insurance can encourage the use of risk-increasing inputs, but it can also decrease people’s incentives to exert effort when the latter is difficult to monitor. This effort reduction can be associated with a decrease in the use of effort-complementary inputs. I study a model of risk-sharing that allows for both effects of insurance on input use and use the latest ICRISAT panel to structurally estimate it. Median fertilizer use is almost three times higher under no sharing than under full insurance for reasonable levels of risk aversion. A subsidy that halves fertilizer prices increases farmers’ welfare by 37% in consumption-equivalent terms.

Equilibrium reporting strategy: Two rate classes and full insurance

AbstractWe propose a multiperiod insurance model under a bonus–malus system with two rate classes and consider an insured who has purchased full insurance for her losses. To explore the potential advantage of underreporting her insurable losses, the insured follows a barrier strategy and only reports lossses above the barrier to the insurer. We obtain a unique equilibrium declaration strategy in closed form for a risk‐neutral insured who maximizes her expected wealth, and in semiclosed form for a risk‐averse insured who maximizes her expected exponential utility of wealth, both over an exogenous random horizon. We find that the equilibrium barriers for the two classes are equal and strictly greater than zero, offering a theoretical explanation for the underreporting of insurable losses, a form of ex post moral hazard. Finally, we consider the case of three rate classes and show, through numerical examples, that the equilibrium barriers are not equal.

(No-)Betting Pareto Optima Under Rank-Dependent Utility

In a pure-exchange economy with no aggregate uncertainty, we characterize in closed form and full generality Pareto-optimal allocations between two agents who maximize (nonconcave) rank-dependent utilities (RDU). We then derive a necessary and sufficient condition for Pareto optima to be no-betting allocations (i.e., deterministic allocations or full insurance allocations). This condition depends only on the probability weighting functions of the two agents and not on their (concave) utility of wealth. Hence, with RDU preferences, it is the difference in probabilistic risk attitudes given common beliefs rather than heterogeneity or ambiguity in beliefs that is a driver of betting behavior. As by-product of our analysis, we answer the question of when sunspots matter in this economy. Funding: M. Ghossoub acknowledges financial support from the Natural Sciences and Engineering Research Council of Canada [Grant 2018-03961].

Risk classification with on‐demand insurance

AbstractOn‐demand insurance is an innovative business model from the InsurTech space, which provides coverage for episodic risks. It makes use of a simple fact in a practical way: People differ in their frequency of exposure as well as the probability of loss. The extra dimension of heterogeneity can be used to screen the insured and shifts the utility‐possibility frontier outward. We provide a sufficient condition under which type‐specific full insurance at the actuarially fair price is incentive compatible. We also show that our results hold for various real‐world implementations of on‐demand insurance.

Prevalence and predictive risk factors of self-stigmatization in patients with rare diseases: Based on health ecology model.

Given the cause of self-stigmatization of patients with rare diseases is complicated, and the self-stigmatization can be prevented by managing the related risk factors. This study aimed to report the prevalence as well as influencing factors associated with self-stigmatization in patients with rare diseases. From January to April 2022, the respondent-driven sampling (RDS) method was used to select patients with rare diseases through the Chinese Organization for Rare Disorders as the subjects. Based on the theoretical model of health ecology, logistic regression analysis was used to explore the association between self-stigmatization level and sample characteristics of patients with rare diseases. A total of 530 patients were included, 50.2% of whom were male, and most of them are under 45 years old (86.5%). The prevalence of self-stigmatization in patients with rare diseases was 85.7%. Logistic regression analysis indicated that age (OR: 0.624, 95% CI: [0.399, 0.976]), mental health status (OR: 0.184, 95% CI: [0.076, 0.445]), family relations (OR: 0.180, 95% CI: [0.074, 0.434]), full time work (OR: 2.835, 95% CI: [1.024, 7.849]) and medical insurance (OR: 0.296, 95% CI: [0.105, 0.835]) were risk factors for self-stigmatization of patients with rare diseases. Chinese patients with rare diseases have a high level of self-stigmatization, and the potential risk factors are multi-level and multi-dimensional.

A continuous-time model of self-protection

This paper deals with an optimal linear insurance demand model, where the protection buyer can also exert a time-dynamic costly prevention effort to reduce her risk exposure. This is expressed as a stochastic control problem that consists in maximising an exponential utility of a terminal wealth. We assume that the effort reduces the intensity of the jump arrival process and interpret this as dynamic self-protection. We solve the problem by using a dynamic programming approach, and we provide a representation of the certainty equivalent of the buyer as the solution to a backward stochastic differential equation (BSDE). Using this representation, we prove that an exponential utility maximiser has an incentive to modify her effort dynamically only in the presence of a terminal reimbursement in the contract. Otherwise, the dynamic effort is actually constant, for a class of compound Poisson loss processes. If there is no terminal reimbursement, we solve the problem explicitly and identify the dynamic certainty equivalent of the protection buyer. This shows in particular that the Lévy property of the loss process is preserved under exponential utility maximisation. We also characterise the constant effort as the unique minimiser of an explicit Hamiltonian, from which we can determine the optimal effort in particular cases. Finally, after studying the dependence of the BSDE associated to the insurance buyer on the linear insurance contract parameter, we prove the existence of an optimal linear cover that is not necessarily zero or full insurance.

Low-income women and use of prescribed contraceptives in the context of full health insurance coverage in France, 2019

ObjectiveMajor socioeconomic differences in contraceptive use are observed in high-income countries. Cost is often cited as a main factor to explain these differences but other barriers may also exist. Our aim was to compare prescribed contraceptive use among low-income and non-low-income women in a national context of full health insurance coverage. Study designIn the French national health insurance database, we selected all women (14.8 million) aged 15–49 years living in France in 2019. We compared the prevalence of use of each prescribed contraceptive between low-income and non-low-income women: oral contraceptives, copper intrauterine devices (IUDs), the levonorgestrel intrauterine system (LNG-IUS), and implants. ResultsIn the study population, 11% had a low income. Fewer low-income women used prescribed contraceptives than non-low-income women (36% vs. 46%, p < 0.001). When using a contraceptive, low-income women used a different method: at 20–24 years old, they used less oral contraceptives (60% vs. 77%, p < 0.001) and more implants (22% vs. 9%, p < 0.001), while at 40–44 years, they used less levonorgestrel intrauterine systems (18% vs. 30%, p < 0.001). ConclusionsEven in a national context of free access to medical care for low-income women, they use less and different prescribed contraceptives than non-low-income women. These results could reflect barriers other than financial cost to the use of prescribed contraceptives by low-income women. ImplicationsFinancial barriers need to be removed in order to increase contraceptive use. However, this may not be sufficient and further research should explore barriers that low-income women may encounter in accessing and choosing their contraception.