Please use this identifier to cite or link to this item: https://hdl.handle.net/10356/159937
Title: Demand for non-life insurance under habit formation
Authors: Li, Wenyuan
Tan, Ken Seng
Wei, Pengyu
Keywords: Business::Finance
Issue Date: 2021
Source: Li, W., Tan, K. S. & Wei, P. (2021). Demand for non-life insurance under habit formation. Insurance: Mathematics and Economics, 101, 38-54. https://dx.doi.org/10.1016/j.insmatheco.2020.06.012
Journal: Insurance: Mathematics and Economics
Abstract: This paper studies the optimal non-life insurance for an individual exhibiting internal habit formation in a life-cycle model. We show that the optimal indemnity is deductible under the expected premium principle. Under the additional assumption of exponential utility functions, we obtain the optimal strategies explicitly and find that habit formation reduces insurance coverage. Our model offers a potential explanation for global underinsurance phenomenon. Some numerical examples and sensitivity analysis are presented to highlight our theoretical results.
URI: https://hdl.handle.net/10356/159937
ISSN: 0167-6687
DOI: 10.1016/j.insmatheco.2020.06.012
Schools: Nanyang Business School 
Research Centres: Insurance Risk and Finance Centre
Rights: Crown Copyright © 2020 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Fulltext Permission: open
Fulltext Availability: With Fulltext
Appears in Collections:NBS Journal Articles

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