Academics research on Assigned Risk

Systemic risk, reinsurance, and the failure of cropinsurancemarkets, Miranda, M. J., & Glauber, J. W. (1997). Systemic risk, reinsurance, and the failure of crop insurance markets.American Journal of Agricultural Economics,79(1), 206-215. Without affordable reinsurance, private crop insurance markets are doomed to fail because systemic weather effects induce high correlation among farm-level yields, defeating insurer efforts to pool risks across farms. Using an empirical model of the U.S. crop insurance market, we find that U.S. crop insurer portfolios are twenty to fifty times riskier than they would be otherwise if yields were stochastically independent across farms. We also find that area yield reinsurance contracts would enable crop insurers to cover most of their systemic crop loss risk, reducing their risk exposure to levels typically experienced by more conventional property liability insurers. Price and availability tradeoffs of automobileinsuranceregulation, Grabowski, H., Viscusi, W. K., & Evans, W. N. (1989). Price and availability tradeoffs of automobile insurance regulation.Journal of Risk and Insurance, 275-299. Early analyses of automobile insurance regulation and deregulation efforts have yielded mixed results, in part because of the small number of completed deregulation experiments. This analysis focuses on a 30-state sample from 1974 through 1981 and on the experience in 11 deregulated states. Overall, regulation decreases the unit price (i.e., inverse loss ratio), but the effect is disproportionately concentrated in a small number of heavily regulated states. For these states, insurance regulation increased the size of the involuntary market by an average of 17 percent. Substantial subsidies to drivers in the involuntary market where found, possibly as great as $292 per year in Massachusetts. The states that undertook deregulation over the past two decades experienced reduced unit prices and decreases in the size of the involuntary market. A simple tax structure for competitive equilibrium and redistribution ininsurancemarkets with asymmetric information, Crocker, K. J., & Snow, A. (1985). A simple tax structure for competitive equilibrium and redistribution in insurance markets with asymmetric information.Southern Economic Journal, 1142-1150.The mandatory healthinsurancesystem in Chile: explaining the choice between public and privateinsurance, Sapelli, C., & Torche, A. (2001). The mandatory health insurance system in Chile: explaining the choice between public and private insurance.International Journal of Health Care Finance and Economics,1(2), 97-110. In Chile, dependent workers and retirees are mandated by law to purchase health insurance, and can choose between private and public health insurance. This paper studies the determinants of the choice of health insurance. Earnings are generally considered the key factor in this choice, and we confirm this, but find that other factors are also important. It is particularly interesting to analyze how the individual's characteristics interact with the design of the system to influence choice. Worse health, as signaled by age or sex (e.g., older people or women in reproductive ages), results in adverse selection against the public health insurance system. This is due to the lack of risk adjustment of the public health insurance's premium. Hence, Chile's risk selection problem is, at least in part, due to the design of the Chilean public insurance system. Privateinsurancecompany involvement in the US cropinsuranceprogram, Ker, A. P. (2001). Private insurance company involvement in the US crop insurance program.Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie,49(4), 557-566. The participation of intermediaries in either public policy or private markets can be justified on the basis of efficiency gains. With respect to private insurance companies and the crop insurance program, efficiency gains may arise from either decreased transaction costs through better established delivery channels and/or the revelation of asymmetric information. However, anecdotal evidence indicates that delivery costs are excessive and it appears that for political economy reasons, rates have and will not be adjusted in response to new information. In conclusion, the valueadded of private insurance companies is questioned in light of the current political economy and thus should serve as a caution to other countries wishing to emulate the U.S. system.