Presenting theoretical foundations and empirical research, this text introduces the reader to the core issues and analytical tools of insurance economics, examining in detail a host of key factors including supply and demand, regulation and social insurance.

This book examines the behavior of individuals at risk and insurance industry policy makers involved in selling, buying and regulation.

Economic and financial research on insurance markets has undergone dramatic growth since its infancy in the early 1960s. Our main objective in compiling this volume was to achieve a wider dissemination of key papers in this literature. Their significance is highlighted in the introduction, which surveys major areas in insurance economics. While it was not possible to provide comprehensive coverage of insurance economics in this book, these readings provide an essential foundation to those who desire to conduct research and teach in the field. In particular, we hope that this compilation and our introduction will be useful to graduate students and to researchers in economics, finance, and insurance. Our criteria for selecting articles included significance, representativeness, pedagogical value, and our desire to include theoretical and empirical work. While the focus of the applied papers is on property-liability insurance, they illustrate issues, concepts, and methods that are applicable in many areas of insurance. The S. S. Huebner Foundation for Insurance Education at the University of Pennsylvania's Wharton School made this book possible by financing publication costs. We are grateful for this assistance and to J. David Cummins, Executive Director of the Foundation, for his efforts and helpful advice on the contents. We also wish to thank all of the authors and editors who provided permission to reprint articles and our respective institutions for technical and financial support.

The theory of insurance is presented in this book, discussed from the viewpoint of the theory of economics of uncertainty. The principle of premium calculation which the book uses is based on economic equilibrium theory and differs from many of the premium systems discussed by actuaries.Reinsurance is developed in the framework of general economic equilibrium theory under uncertainty. Here ordering of risks, preferences and utility theory play an important role. The book discusses the markets for insurance and divides them into three classes: (i) life insurance (ii) business insurance and (iii) household insurance, and these classes are each treated extensively in three separate chapters. Finally uninsurable risks are presented under "asymmetric information". Here moral hazard and adverse selection are treated and illustrations are given, some based on game theory.

This timely two-volume collection successfully combines economically-oriented legal scholarship on insurance with policy-relevant economics scholarship on insurance. Professor Schwarcz has selected seminal contributions from the past twenty years to explore some of the central questions involving the role of the state in insurance markets. These include rules governing the interpretation and enforceability of insurance contracts, the regulation of insurers and insurance markets, and the role of public programs in supporting private insurance markets. This essential collection will be of immense value and interest to students and academics interested in the diverse field of the law and economics of insurance.

Written for advanced undergraduate and master’s level courses, this book builds from a base of asymmetric information issues to discuss a wide array of topics and is illustrated with some timely examples. Covers diverse issues such as risk aversion, expected utility, and moral hazard within the pure theory of insurance Provides a clear exposition of the necessary mathematics, a feature which cannot be found in readers on the topic Utilizes an undergraduate economics major level of math Uses the simplest economic models possible to keep the text intuitive Introduces more mathematically complex techniques such as basic optimization for students wishing to 'go further' in their analysis

The book brings together academics, regulators, and industry experts to provide a multifaceted array of research and perspectives on insurance, its role and functioning, and the potential systemic risk it could create.

Addressing the challenge of covering heath care expenses—while minimizing economic risks. Moral hazard—the tendency to change behavior when the cost of that behavior will be borne by others—is a particularly tricky question when considering health care. Kenneth J. Arrow’s seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of moral hazard for health care, and Amy Finkelstein—recognized as one of the world’s foremost experts on the topic—here examines this issue in the context of contemporary American health care policy. Drawing on research from both the original RAND Health Insurance Experiment and her own research, including a 2008 Health Insurance Experiment in Oregon, Finkelstein presents compelling evidence that health insurance does indeed affect medical spending and encourages policy solutions that acknowledge and account for this. The volume also features commentaries and insights from other renowned economists, including an introduction by Joseph P. Newhouse that provides context for the discussion, a commentary from Jonathan Gruber that considers provider-side moral hazard, and reflections from Joseph E. Stiglitz and Kenneth J. Arrow. “Reads like a fireside chat among a group of distinguished, articulate health economists.” —Choice

Poor people in developing countries are often affected by droughts, floods, illness, crop failure, job loss, and economic downturns. Much of their energy goes into coping with these shocks and into day-to-day survival. While insurance and credit markets, combined with widespread social security, provide an important cushion against poverty in rich countries, the need for immediate survival may lock the poor into persistent poverty in developing countries.The poor in developing countries do have informal mechanisms to cope with risk and misfortune. These are based on income diversification, risk avoidance, self-insurance by saving together with family, and community-based mutual assistance. Nevertheless, the scope of these mechanisms remains limited. Repeated individual-specific shocks such as illness or pests, or covariate risks associated with drought, flood, or recession, undermine the ability of individuals and their families to cope withrisk.We now know much more about vulnerability to risk and how poor people cope. Even more importantly, we have learned much about the large long-term consequences of these risks, which condemns many to persistent poverty and excludes them from economic growth. But there is much that can be done. The micro-level studies that underpin this book offer new insights on how effective public action could be more effective in protecting the vulnerable against persistent poverty. Policy should focus onproviding a comprehensive menu of ex-ante and post-crisis protection mechanisms, including new forms of insurance, savings, safety nets, and the means to strengthen the poor's asset base. Local communities have a big role to play: public funds should not be used to replace indigenous community-basedsupport networks; rather they should be used to build on the strengths of these networks to ensure broader and more effective protection.With numerous thematic chapters and case studies of both best practice and of failure, from a mix of low-income and middle-income countries across the developing world, this book evaluates alternatives in widening insurance and protection provision, and makes an important contribution to the topical field of insurance and risk.