Three economic issues in property/casualty insurance are examined in this thesis.
Chapter 2 explores the impact of supply side heterogeneity on the market equilibrium.
Multiple period contracting and informational issues are examined in Chapters 3 and 4.
Property/casualty insurance is marketed in two manners: through agency writers and
direct writers. Direct writers can sell insurance at a lower cost than agency writers. By
exploiting demand side characteristics, Chapter 2 extends the traditional literature by
examining the behaviour of heterogeneous insurers within a framework that admits both
direct and agency writers in equilibrium. Heterogeneous travel costs are used to support
this equilibrium. A second model is developed in which claim frequency heterogeneity is
introduced on the demand side. It is assumed that agency writers can better discern a
consumer's risk type. Characteristics of equilibria under which direct and agency writers
exist are derived.
In Chapter 3, Rothschild and Stiglitz's (1976) single period insurance model is extended
to multiple periods. In a multiple period framework, insurers offer a sequence of single
period contracts in which future contracts are conditioned on past contract choices. For
dynamic consistency, once low risks have revealed their type, future contracts must be
contingent on this event. This contract structure is compared to both a sequence of one
period pooling contracts and a sequence of one period separating contracts. Numerical
examples illustrate the results. In Chapter 4, learning by insurers is examined in a model in which consumers possess
search costs. The presence of search costs allows inefficient insurers to remain in the
market, and allows lower cost firms to earn higher profit loadings each period. Insurers,
who possess differing initial valuations of a consumer's loss propensity, update the
contract offered each period based on a consumer's past accident history. In a multiple
period setting, consumers search for new coverage and switch insurers when the price
charged by their contracting insurer exceeds the price that they are willing to pay.
| Identifer | oai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:BVAU.2429/9502 |
| Date | 11 1900 |
| Creators | Kelly, Mary Virginia |
| Source Sets | Library and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada |
| Language | English |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Relation | UBC Retrospective Theses Digitization Project [http://www.library.ubc.ca/archives/retro_theses/] |
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