Insuring the uninsurable : brokers and incomplete insurance contracts

How do markets spread risk when events are unknown or unknowable and where not anticipated in an insurance contract? While the policyholder can "hold up" the insurer for extra contractual payments, the continuing gains f
How do markets spread risk when events are unknown or unknowable and where not anticipated in an insurance contract? While the policyholder can "hold up" the insurer for extra contractual payments, the continuing gains from trade on a single contract are often too small to yield useful coverage. By acting as a repository of the reputations of the parties, we show the brokers provide a coordinating mechanism to leverage the collective hold up power of policyholders. This extends both the degree of implicit and explicit coverage. The role is reflected in the terms of broker engagement, specifically in the ownership by the broker of the renewal rights. Finally, we argue that brokers can be motivated to play this role when they receive commissions that are contingent on insurer profits. This last feature questions a recent, well publicized, attack on broker compensation by New York attorney general, Elliot Spitzer. Klassifikation: G22, G24, L14
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Metadaten
Author:Neil A. Doherty, Alexander Muermann
URN:urn:nbn:de:hebis:30-23368
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,24
Series (Serial Number):CFS working paper series (2005, 24)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/12/20
Tag:Brokerage; Contingent Commissions; Incomplete Insurance Contracts; Reputation
SWD-Keyword:Versicherungsvertrag
HeBIS PPN:197301266
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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