PlumX Metrics
Embed PlumX Metrics

Optimal brokerage commissions for fair insurance: A first order approach

GENEVA Risk and Insurance Review, ISSN: 1554-964X, Vol: 36, Issue: 2, Page: 189-201
2011
  • 3
    Citations
  • 1
    Usage
  • 7
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

Article Description

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. © 2011 The International Association for the Study of Insurance Economics 1554-964X/11.

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know