In this article, we show that common insurance policy provisions—namely, deductibles, coinsurance, and maximum limits—can arise as a result of adverse selection in a competitive insurance market. Research on adverse selection typically builds on the assumption that different risk types...

Under Yaari's dual theory of risk, we determine the equilibrium separating contracts for high and low risks in a competitive insurance market, in which risks are defined only by their expected losses, that is, a high risk is a risk that has a greater expected loss than a low risk. Also, we...

The potential need for long-term care (LTC) is one of the greatest financial risks faced not only by the elderly but also by their adult children, who often provide care or financial assistance. We investigate adult children's role in the demand for LTC insurance. Similar to flood insurance, we...

This study uses data from the Insurance Research Council to investigate changes in the use of attorneys and in the filing of legal claims to resolve automobile third-party bodily injury claims between 1977 and 1997. We find results consistent with the general public perception that the use of...

This study sets forth the legal distinctions among bad-faith laws and provides a theoretical foundation for our hypotheses that bad-faith laws affect both economic and noneconomic damage amounts. We use data that include information about uninsured and underinsured “closed claims”—that is,...

We investigate extensions of the classic Rothschild and Stiglitz (1976) (RS) model of adverse selection under asymmetric information. In RS, low-risk customers are worse off owing to an externality created by high-risk buyers in the market. We find critical changes in insurance buyers' behavior...

Wildfire activity and escalating suppression costs continue to threaten the financial health of federal land management agencies. In order to minimize and effectively manage the cost of financial risk, agencies need the ability to quantify that risk. A fundamental aim of this research effort,...

Contingent commissions, which are payments made by an insurer to brokers based on the volume and profitability of insurance placed with the insurer, have been criticized as damaging to the relationship between the insured and its broker. The argument is made that contingent commission payments...