Recent Findings from Y.C. Chi and Co-Authors Yields New Data on Actuarial Science (On the Optimality of a Straight Deductible Under Belief Heterogeneity)

2019 APR 10 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Current study results on Science - Actuarial Science have been published. According to news reporting originating in Beijing, People’s Republic of China, by NewsRx editors, the research stated, “This article attempts to extend Arrow’s theorem of the deductible to the case of belief heterogeneity, which allows the insured and the insurer to have different beliefs about the distribution of the underlying loss. Like Huberman et al.”

Funders for this research include National Natural Science Foundation of China, MOE (China) Project of Key Research Institute of Humanities and Social Sciences at Universities, Natural Science Foundation of Shandong Province (China).

The news reporters obtained a quote from the research, “[(1983) Bell Journal of Economics 14(2), 415-426], we preclude ex post moral hazard by asking both parties in the insurance contract to pay more for a larger realization of the loss. It is shown that, ceteris paribus, full insurance above a constant deductible is always optimal for any chosen utility function of a risk-averse insured if and only if the insurer appears more optimistic about the conditional loss given non-zero loss than the insured in the sense of monotone hazard rate order.”

According to the news reporters, the research concluded: “We derive the optimal deductible level explicitly and then examine how it is affected by the changes of the insured’s risk aversion, the insurance price and the degree of belief heterogeneity.”

For more information on this research see: On the Optimality of a Straight Deductible Under Belief Heterogeneity. Astin Bulletin, 2019;49(1):243-262. Astin Bulletin can be contacted at: Cambridge Univ Press, Edinburgh Bldg, Shaftesbury Rd, CB2 8RU Cambridge, England.

Our news correspondents report that additional information may be obtained by contacting Y.C. Chi., Cent Univ Finance & Econ, China Inst Actuarial Sci, Beijing 100081, People’s Republic of China.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1017/asb.2018.30. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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