Insurance markets

Theft by employees is another major exclusion from the theft policy, although the insurance market is prepared to cover this risk (subject to excess) through a fidelity policy. 

Insurance industry is also developing alternative risk transfer products, given that conventional reinsurance arrangements may in future cover a smaller proportion of total losses, and there may be insufficient capital available to insurance markets to cover these losses [15]. 

This chapter focuses on the issue of co-payment, which occurs in insurance environments when insurer and insured share the payment of the price of the medicine. Using this as our central axis, we begin by addressing certain conceptual aspects, including the various forms, formulas and personal extension of co-payment, in the first section, and in the second section we go on to make a comparison between co-payment in insurance markets and in compulsory public insurance systems. 

CO-PAYMENT IN INSURANCE MARKETS AND COMPULSORY PUBLIC INSURANCE SYSTEMS... 

We start by considering the (free) health insurance market. An actuarially fair insurance premium is one that equals the expected value of its yield in health... 

However, these results are not applicable to compulsory pubhc insurance, nor to National Health Systems. The most notable differences between drag co-payment in an insurance market and in a National Health System or compulsory public insurance environment lie in their voluntariness or otherwise (users ability to choose their coverage) and the ultimate financing of the services (risk-adjusted premiums as opposed to taxes or social insurance contributions adjusted according to economic capacity). Hence, in compulsory public insurance systems, co-payment regulation is used not only as a health policy instrument but also as one of redistribution of income. 

For a more general discussion of health insurance markets, including the roles of moral hazard and adverse selection, see Cutler and Zeckhauser (2000). 

Regardless of what institutions govern human exposure to chemicals, residual exposure will exist. Risk-averse individuals will want to share that risk through insurance. Chapter 5 explains the operation of insurance markets, particularly environmental insurance markets. The federal "Superfund" program and certain court decisions have made insurers reluctant to write environmental insurance contracts. Until Congress and the courts stop confiscating wealth through arbitrary statutes and common-law decisions, the environmental liability insurance market will not work well. 

Under certain conditions, individuals can share the costs of those residual risks through insurance contracts. In this chapter, 1 describe the conditions in which people will agree to share risks and what strategies ameliorate insurance market failures when those conditions do not exist. Generally, environmental insurance markets face many problems and have nof worked well. 

In well-functioning insurance markets, individuals transfer risks (the prevention costs of which exceed benefits) to insurance companies. Those companies accept the risks because the premiums they collect equal the claims they pay plus other business expenses (Shavell 1987, Chapter 8). 

Private insurance markets do not work well if there is adverse selection, moral hazard, or inadequate population-level information about the insured risks. 

Winter (1991) argues that unstable interest rates, unanticipated changes in tort liability rules, asymmetric information, adverse selection, and capital market inefficiencies all caused difficulties for fhe liability insurance market during the 1980s. 

Insurance markets work well when damages occur at a known population rate, individuals can do little to alter their own damage risks, individuals have little knowledge about how their own damage risks deviate from the mean population risk, and real interest rates and property rights are stable. 

A less known but equally important impediment to stable environmental insurance markets (because of fhe long lag time between premium payment and damage claims) is erratic real interest rates. The political mismanagement of monefary and fiscal policy and fhe resulting inflation during the 1968-1979 period continue to affect real interest rates even today. 

Epstein, Richard A. 1985. Products Liability as an Insurance Market. Journal of Legal Studies 14 645-69. 

Harrington, Scott E. 1988. Prices and Profits in the Liability Insurance Market. In Liability Perspectives and Policy. Edited by Robert E. Litan and Clifford Winston. Washington Brookings Institution. 

Rothschild, Michael, and Joseph Stiglitz. 1976. Equilibrium in Competitive Insurance Markets An Essay on the Economics of Imperfect Information. Quarterly Journal of Economics 90 (November) 629-49. 

Winter, Ralph A. 1991. The Liability Insurance Market. Journal of Economic Perspectives 5 (Summer) 115-36. 

Adams, J. F., "Consumer Attitudes, Judicial Decision, Government Regulation, and the Insurance Market", The Journal of Risk and Insurance (1975) 501-512. 

Nearly half of the individual purchasers have access to group coverage through professional organizations, nonprofit associations, or former employers. An estimated 8.6 million persons purchase this coverage in what is called the individual health insurance market. 

Center for Studying Health System Change (2002). The individual health insurance market. In Issue Brief Findings from HSC. Washington, D.C. Center for Studying Health System Change. 

Lee, C. Rogal, D. Risk Adjustment A Key to Changing Incentives in the Health Insurance Market, Alpha Center Washington, DC, 1997 1-26. 

Despite the lack of data, it is possible to sketch a rough picture of product liability trends in the research-based pharmaceutical industry from a variety of sources that are incomplete by themselves, including trends in law and insurance markets, a few in-depth studies of product liability litigation in particular jurisdictions, and anecdotal accounts of products particularly vulnerable to liability claims ... 

The development of environmental policies was not without its problems. By the end of the 1970s there were only two insurers able to offer such policies. By the end of 1983 there were some 40 insurers offering environmental policies. Unfortunately by the end of 1984 the environmental insurance market collapsed leaving only one insurer surviving in the USA market. 

---