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Incomplete Markets for Insurance: An Overview

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Book cover Foundations of Insurance Economics

Part of the book series: Huebner International Series on Risk, Insurance and Economic Security ((HSRI,volume 14))

Abstract

An area of much recent theoretical attention is the modeling of insurance decisions when markets are incomplete. Such incompleteness is said to exist when insurance contracts do not exist for all risks facing an individual or a firm. In such a market, insurance decisions cannot be made myopically and must recognize the presence of uninsurable background risk. This paper presents a nontechnical overview of the incomplete-market theory. The way in which market incompleteness may invalidate some long-standing theoretical results — and may indeed even cause seemingly perverse results — is examined. Possible causes of incomplete markets as well as some implications of the theory for reinsurance and for corporate purchases of insurance are also discussed.

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Author information

Authors and Affiliations

  1. Vanderbilt University, USA

    Harris Schlesinger

  2. University of Illinois, USA

    Neil A. Doherty

Authors
  1. Harris Schlesinger
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  2. Neil A. Doherty
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Editor information

Editors and Affiliations

  1. Université de Montréal, Canada

    Georges Dionne

  2. University of South Carolina, USA

    Scott E. Harrington

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© 1992 Springer Science+Business Media New York

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Schlesinger, H., Doherty, N.A. (1992). Incomplete Markets for Insurance: An Overview. In: Dionne, G., Harrington, S.E. (eds) Foundations of Insurance Economics. Huebner International Series on Risk, Insurance and Economic Security, vol 14. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7957-5_6

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  • DOI: https://doi.org/10.1007/978-94-015-7957-5_6

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-90-481-5789-1

  • Online ISBN: 978-94-015-7957-5

  • eBook Packages: Springer Book Archive

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