Given these fixed premium risks, a multi-year variable premium contract for the insurance industry may be a more desirable prospect. Footnote 30 This would also help to reduce the price gap between annual and multi-year contracts, in order to make them more competitive in the market. Kunreuther et al.4 propose to renegotiate prices over time on the basis of new information. B, for example, on the basis of a regularly monitored risk index, transmitted by a third party. However, such a system would create considerable technical challenges. Aerts and Botzen24 highlight the difficulties encountered in developing such a risk index for natural hazards, data availability gaps (for example. B current risk maps reflecting the evolution of the protection infrastructure) and the challenges of highlighting risk trends due to statistical noise (e.g. B in chaotic weather) and short-term risk variations (e.g. B climate cycles, such as the southern oscillation. B of nino). Indexes should also reflect changes under broader conditions, such as the cost of capital and insured assets. We argue that the ability to adjust premiums annually, including in a defined area, eliminates some of the benefits of a multi-year contract, particularly the financial stability created for the policyholder and the benefits of reducing administrative costs for the insurer. The possibility of changing the premium should probably be accompanied by a right of withdrawal, which removes the security of the long-term relationship between the insurer and the policyholder.
Klein, R. (2008) Disaster Risk and Non-Life Insurance Regulation, Discussion Paper, Georgia State University, Atlanta, Georgia. In the following sections, the arguments for and against multi-year insurance contracts are examined from different angles. The following section examines the case of multi-year insurance contracts in the scientific literature. The following section contains new quantitative analyses on the impact on the technical price of insurance. The following two sections address the broader issues of practicality and compromise. The paper focuses exclusively on the insurance contracts and, in particular, on general retail insurance in the private sector; Some lessons from the life insurance field, however, are included to illustrate the practical difficulty of long-term guarantees. Applications for the commercial market and public insurers are discussed in the “Discussion” section.
Eisen, R. (1990) `Problems of equilibria in insurance markets with asymetric information`, in H. Loubergé (ed.) Risk Information and Insurance, Kluwer Academic Publishers, Dordrecht, The Netherlands, pp.