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Full-Text Articles in Insurance

Insuring Future Climate Catastrophes, Howard Kunreuther, Erwann Michel-Kerjan, Nicola Ranger May 2013

Insuring Future Climate Catastrophes, Howard Kunreuther, Erwann Michel-Kerjan, Nicola Ranger

Operations, Information and Decisions Papers

The combined influences of a change in climate patterns and the increased concentration of property and economic activity in hazard-prone areas has the potential of restricting the availability and affordability of insurance. This paper evaluates the premiums that private insurers are likely to charge and their ability to cover residential losses against hurricane risk in Florida as a function of (a) recent projections on future hurricane activity in 2020 and 2040; (b) insurance market conditions (i.e., soft or hard market); (c) the availability of reinsurance; and (d) the adoption of adaptation measures (i.e., implementation of physical risk reduction ...


Single-Year And Multi-Year Insurance Policies In A Competitive Market, Paul R. Kleindorfer, Howard Kunreuther, Chieh Ou-Yang Aug 2012

Single-Year And Multi-Year Insurance Policies In A Competitive Market, Paul R. Kleindorfer, Howard Kunreuther, Chieh Ou-Yang

Operations, Information and Decisions Papers

This paper examines the demand and supply of annual and multi-year insurance contracts with respect to protection against a catastrophic risk in a competitive market. Insurers who offer annual policies can cancel policies at the end of each year and change the premium in the following year. Multi-year insurance has a fixed annual price for each year and no cancellations are permitted at the end of any given year. Homeowners are identical with respect to their exposure to the hazard. Each homeowner determines whether or not to purchase an annual or multi-year contract so as to maximize her expected utility ...


Is Imprecise Knowledge Better Than Conflicting Expertise? Evidence From Insurers’ Decisions In The United States, Laure Cabantous, Denis Hilton, Howard Kunreuther, Erwann Michel-Kerjan Jun 2011

Is Imprecise Knowledge Better Than Conflicting Expertise? Evidence From Insurers’ Decisions In The United States, Laure Cabantous, Denis Hilton, Howard Kunreuther, Erwann Michel-Kerjan

Operations, Information and Decisions Papers

This paper reports the results of the first experiment in the United States designed to distinguish between two sources of ambiguity: imprecise ambiguity (expert groups agree on a range of probability, but not on any point estimate) versus conflict ambiguity (each expert group provides a precise probability estimate which differs from one group to another). The specific context is whether risk professionals (here, insurers) behave differently under risk (when probability is well-specified) and different types of ambiguity in pricing catastrophic risks (floods and hurricanes) and non-catastrophic risks (house fires). The data show that insurers charge higher premiums when faced with ...


Risk-Based Pricing And Risk-Reducing Effort: Does The Private Insurance Market Reduce Environmental Accidents?, Haitao Yin, Howard Kunreuther, Matthew. W. White May 2011

Risk-Based Pricing And Risk-Reducing Effort: Does The Private Insurance Market Reduce Environmental Accidents?, Haitao Yin, Howard Kunreuther, Matthew. W. White

Operations, Information and Decisions Papers

This paper examines whether risk-based pricing promotes risk-reducing effort. Risk-based pricing is common in private insurance markets but rare in government assurance programs. We analyze accidental underground fuel tank leaks—a source of environmental damage to water supplies—over a 14-year period, using disaggregated (facility-level) data and policy variation in financing the cleanup of tank leaks over time. The data indicate that eliminating a state-level government assurance program and switching to private insurance markets to finance cleanups reduce the frequency of underground fuel tank leaks by more than 20 percent. This corresponds to more than 3,000 fuel tank release ...


Reducing Losses From Catastrophic Risks Through Long-Term Insurance And Mitigation, Howard Kunreuther Jun 2008

Reducing Losses From Catastrophic Risks Through Long-Term Insurance And Mitigation, Howard Kunreuther

Operations, Information and Decisions Papers

No abstract provided.


Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther Apr 2008

Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther

Operations, Information and Decisions Papers

We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling “at-fault” insurance can partially internalize this externality and thereby improve individual and social welfare.


Looking Beyond Tria: A Clinical Examination Of Potential Terrorism Loss Sharing, Howard Kunreuther, Erwann Michel-Kerjan Jan 2006

Looking Beyond Tria: A Clinical Examination Of Potential Terrorism Loss Sharing, Howard Kunreuther, Erwann Michel-Kerjan

Operations, Information and Decisions Papers

The Terrorism Risk Insurance Act of 2002 (TRIA) established a public-private program to cover commercial enterprises against foreign terrorism on US soil. It was a temporary measure to increase the availability of risk coverage for terrorist acts by requiring insurers to provide coverage. Initially established to sunset on December 31, 2005, a two-year extension has been voted by Congress and signed by the President in December. This paper provides an extensive series of empirical analyses of loss sharing under this program in 2005, and a prospective analysis for 2006. Using data collected on the top 451 insurers operating in the ...