Optimal Insurance Contracts with Limited Commitment and Unobservable Disability

2019 ◽  
Author(s):  
Kyoung Jin Choi ◽  
Junkee Jeon ◽  
Ho-Seok Lee ◽  
Hsuan-Chih Lin
Keyword(s):  
Limited Commitment ◽  
Optimal Insurance ◽  
Insurance Contracts

scholarly journals Pareto-Optimal Insurance Contracts With Premium Budget and Minimum Charge Constraints

2019 ◽  
Author(s):  
Alexandru Vali Asimit ◽  
Ka Chun Cheung ◽  
Wing Fung Chong ◽  
Junlei Hu
Keyword(s):  
Pareto Optimal ◽  
Optimal Insurance ◽  
Insurance Contracts

The Wrong Shape of Insurance? What Cross-Sectional Distributions Tell Us about Models of Consumption Smoothing

2013 ◽  
Vol 5 (4) ◽  
pp. 107-140 ◽  
Author(s):  
Tobias Broer
Keyword(s):  
Risk Sharing ◽  
Limited Commitment ◽  
Cross Sectional ◽  
Joint Distributions ◽  
Insurance Contracts ◽  
Moment Measures ◽  
Method Of Moments Estimation ◽  
Estimated Risk ◽  
Standard Models ◽  
Insurance Model

This paper shows how two standard models of consumption risk-sharing—self-insurance through borrowing and saving and limited commitment to insurance contracts—replicate similarly well the standard, second-moment measures of insurance observed in US micro data. A nonparametric analysis, however, reveals strongly contrasting and counterfactual joint distributions of consumption, income and wealth. Method of moments estimation shows how measurement error in consumption eliminates excessive skewness and smoothness of consumption growth. Moreover, counterfactual nonlinearities disappear at high-estimated risk aversion under self-insurance, but are a robust feature of limited commitment. Its “shape of insurance” thus argues in favor of the self-insurance model. (JEL D14, D81, D91, G22, E21)

scholarly journals OPTIMAL ASSET ALLOCATION IN LIFE INSURANCE: THE IMPACT OF REGULATION

2016 ◽  
Vol 46 (3) ◽  
pp. 605-626 ◽  
Author(s):  
An Chen ◽  
Peter Hieber
Keyword(s):  
Life Insurance ◽  
Asset Allocation ◽  
Regulatory Policy ◽  
Capital Requirements ◽  
Insurance Company ◽  
Traffic Light ◽  
Optimal Insurance ◽  
Insurance Contracts ◽  
Solvency Capital ◽  
The Impact

AbstractIn a typical equity-linked life insurance contract, the insurance company is entitled to a share of return surpluses as compensation for the return guarantee granted to the policyholders. The set of possible contract terms might, however, be restricted by a regulatory default constraint — a fact that can force the two parties to initiate sub-optimal insurance contracts. We show that this effect can be mitigated if regulatory policy is more flexible. We suggest that the regulator implement a traffic light system where companies are forced to reduce the riskiness of their asset allocation in distress. In a utility-based framework, we show that the introduction of such a system can increase the benefits of the policyholder without deteriorating the benefits of the insurance company. At the same time, default probabilities (and thus solvency capital requirements) can be reduced.

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