Evolutionary game dynamics of index insurance with refund or non-refund risk sharing mechanism DOI

Lichen Wang,

Shijia Hua, Yuyuan Liu

et al.

Chaos An Interdisciplinary Journal of Nonlinear Science, Journal Year: 2025, Volume and Issue: 35(5)

Published: May 1, 2025

Index insurance, by utilizing preset indices, effectively mitigates the moral hazards and adverse selection inherent in traditional insurance. Yet, mismatch between these indices actual losses, known as basis risk, severely hinders its broader adoption. The existing study has proposed a risk sharing mechanism, which individuals who have not suffered losses but received compensation assist those compensation. Nonetheless, due to individual profit-seeking behavior, this mechanism is difficult implement practice. In study, we construct threshold-discounted index insurance game model including new mechanisms. model, purchasing are required contribute pool compensate facing risk. We analyze two mechanisms for handling funds: refund non-refund depending on whether funds returned policyholders when no occurs. find that low remains key sale of under both Moreover, with an appropriate ratio, introduction significantly increases adoption stronger capability, proves more popular. Additionally, larger group sizes or lower collective thresholds can enhance stability aid capacity pool, thereby further increasing rates. Finally, companies should accurately assess aversion level population, it also factor affecting sales.

Language: Английский

Evolutionary game dynamics of index insurance with refund or non-refund risk sharing mechanism DOI

Lichen Wang,

Shijia Hua, Yuyuan Liu

et al.

Chaos An Interdisciplinary Journal of Nonlinear Science, Journal Year: 2025, Volume and Issue: 35(5)

Published: May 1, 2025

Index insurance, by utilizing preset indices, effectively mitigates the moral hazards and adverse selection inherent in traditional insurance. Yet, mismatch between these indices actual losses, known as basis risk, severely hinders its broader adoption. The existing study has proposed a risk sharing mechanism, which individuals who have not suffered losses but received compensation assist those compensation. Nonetheless, due to individual profit-seeking behavior, this mechanism is difficult implement practice. In study, we construct threshold-discounted index insurance game model including new mechanisms. model, purchasing are required contribute pool compensate facing risk. We analyze two mechanisms for handling funds: refund non-refund depending on whether funds returned policyholders when no occurs. find that low remains key sale of under both Moreover, with an appropriate ratio, introduction significantly increases adoption stronger capability, proves more popular. Additionally, larger group sizes or lower collective thresholds can enhance stability aid capacity pool, thereby further increasing rates. Finally, companies should accurately assess aversion level population, it also factor affecting sales.

Language: Английский

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