Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 189-201 |
| Number of pages | 13 |
| Journal | GENEVA Risk and Insurance Review |
| Volume | 36 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Dec 2011 |
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Keywords
- First-order approach
- Insurance brokerage commissions
- Maximum likelihood ratio condition
- Mean-preserving spread-reducing effort
- Principal-agent problem
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Optimal brokerage commissions for fair insurance : a first order approach. / HAU, Arthur.
In: GENEVA Risk and Insurance Review, Vol. 36, No. 2, 12.2011, p. 189-201.Research output: Journal Publications › Journal Article (refereed)
TY - JOUR
T1 - Optimal brokerage commissions for fair insurance : a first order approach
AU - HAU, Arthur
PY - 2011/12
Y1 - 2011/12
N2 - This paper studies a principal-agent insurance brokerage problem with a risk-averse principal (an insured) and a risk-neutral agent (a broker). The concept of mean-preserving, spread-reducing (MPSR) effort is introduced to model the broker's activities. Using the first-order approach, it is shown that under some common conditions, the insured may concavify the reward function to induce the risk-neutral agent to exert MPSR brokering effort. These conditions, together with an additional condition, guarantee the validity of the first-order approach even when the monotone likelihood ratio condition (used exclusively to justify the first-order approach) is violated.
AB - This paper studies a principal-agent insurance brokerage problem with a risk-averse principal (an insured) and a risk-neutral agent (a broker). The concept of mean-preserving, spread-reducing (MPSR) effort is introduced to model the broker's activities. Using the first-order approach, it is shown that under some common conditions, the insured may concavify the reward function to induce the risk-neutral agent to exert MPSR brokering effort. These conditions, together with an additional condition, guarantee the validity of the first-order approach even when the monotone likelihood ratio condition (used exclusively to justify the first-order approach) is violated.
KW - First-order approach
KW - Insurance brokerage commissions
KW - Maximum likelihood ratio condition
KW - Mean-preserving spread-reducing effort
KW - Principal-agent problem
UR - http://commons.ln.edu.hk/sw_master/6609
UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-82455188204&doi=10.1057%2fgrir.2010.11&partnerID=40&md5=57648ad679fbf88757423e597c7f3771
U2 - 10.1057/grir.2010.11
DO - 10.1057/grir.2010.11
M3 - Journal Article (refereed)
VL - 36
SP - 189
EP - 201
JO - GENEVA Papers on Risk and Insurance Theory
JF - GENEVA Papers on Risk and Insurance Theory
SN - 1554-964X
IS - 2
ER -