Record Details

Aggregate Rollover Coverage: A First-Best Solution for the Package-Shipping Industry

Journal of Insurance and Financial Management

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Title Aggregate Rollover Coverage: A First-Best Solution for the Package-Shipping Industry
 
Creator Sprigg, Jim
Mitra, Pinaki
 
Description When specifying a new coverage option, underwriters must assess its viability with respect to profitability, consumer demand, and regulatory consent. This article specifies a new coverage option for clients of the package-shipping industry, who face transit risks of loss, damage, and delay. Currently, shipping companies and third-party insurers offer pay-as-you-go coverage options under per-claim deductible schemes, which tend to attract “low-volume” clients who suffer fluctuating losses. However, there are no standard coverage options for high-volume clients who find it cheaper to self-insure because their loss experience converges toward its asymptotic properties. In theory, aggregate deductibles offer an efficient alternative to self-insurance. In practice, aggregate deductible schemes are actuarially intractable because underwriters rarely know the precise number of shipments to be insured under a period of performance. This article introduces a “rollover” scheme that allows for aggregate deductibles, derives the conditions for a first-best solution, and describes the economic surplus created by the scheme.
 
Publisher Journal of Insurance and Financial Management
 
Contributor —
 
Date 2017-04-29
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://journal-of-insurance-and-financial-management.com/index.php/JIFM/article/view/81
 
Source Journal of Insurance and Financial Management; Vol 2, No 5 (2017): Journal of Insurance and Financial Management
2371-2112
 
Language eng
 
Relation https://journal-of-insurance-and-financial-management.com/index.php/JIFM/article/view/81/pdf
 
Rights Copyright (c) 2017 Jim Sprigg
http://creativecommons.org/licenses/by/4.0