Limited Information and its Impact on a Policyholder's Optimal Choice on Deductibles

Item Type Conference or Workshop Item (Paper)
Abstract

When determining the optimal deductible level for an insurance policy, a policyholder faces two sources of uncertainty. First, uncertainty arises from the randomness of future losses. The opacity of the functional forms of the policyholder's loss distribution as well as her utility function, on the other hand, causes a second kind of uncertainty. While the academic literature focuses on the former, we additionally incorporate limited information on these functional forms. That is, we draw on an expected utility framework and analyze the relationship between optimal deductible levels under limited
and full information. Further, we derive heuristics under limited information in order to approximate the optimal deductible level under full information.

Authors Fey, Jan-Christian; Schmeiser, Hato & Schreiber, Florian
Language English
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area None
Date 2020
Event Title World Risk and Insurance Economics Congress (WRIEC)
Event Location Online
Event Dates August 3-7, 2020
Depositing User M.Sc. Jan-Christian Fey
Date Deposited 17 Nov 2020 15:16
Last Modified 17 Nov 2020 15:26
URI: https://www.alexandria.unisg.ch/publications/261489

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Citation

Fey, Jan-Christian; Schmeiser, Hato & Schreiber, Florian: Limited Information and its Impact on a Policyholder's Optimal Choice on Deductibles. 2020. - World Risk and Insurance Economics Congress (WRIEC). - Online.

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https://www.alexandria.unisg.ch/id/eprint/261489
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