Previous literature has emphasized that the monetary cost of preventive care should be subsidized in a (traditional) insurance contract since policyholders ignore the impact of their prevention on the insurance premium. This paper analyses participating policies as an alternative contract encouraging long run enrollment and prevention. We show that, with participating policies, policyholders can fully internalize the benefit of their prevention choice on the premium. This occurs when cooperation among members of the pool can be sustained as an equilibrium in a repeated interaction game with uncertain horizon. Cooperation is possible in small insurance companies.
Improving Compliance With Preventive Care: Cooperation in Mutual Health Insurance
BARIGOZZI, FRANCESCA;PIGNATARO, GIUSEPPE
2011
Abstract
Previous literature has emphasized that the monetary cost of preventive care should be subsidized in a (traditional) insurance contract since policyholders ignore the impact of their prevention on the insurance premium. This paper analyses participating policies as an alternative contract encouraging long run enrollment and prevention. We show that, with participating policies, policyholders can fully internalize the benefit of their prevention choice on the premium. This occurs when cooperation among members of the pool can be sustained as an equilibrium in a repeated interaction game with uncertain horizon. Cooperation is possible in small insurance companies.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
