The efficiency of voluntary risk classification in insurance markets

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<title>The efficiency of voluntary risk classification in insurance markets</title>
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<namePart>Crocker, Keith J.</namePart>
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<abstract displayLabel="Summary">It has been established that categorical discrimination based on observable characteristics such as gender, age, or ethnicity enhances efficiency. We consider a different form of risk classification when there exists a costless yet imperfectly informative test of risk type, with the test outcome unknown to the agents ex ante. We show that a voluntary risk classification in which agents are given the option to take the test always increases efficiency compared with no risk classification. Moreover, voluntary risk classification also Pareto dominates a regime of compulsory risk classification in which all agents are required to take the test.</abstract>
<note type="statement of responsibility">Keith J. Crocker, Nan Zhu</note>
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<topic>Cálculo actuarial</topic>
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<title>The Journal of risk and insurance</title>
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<publisher>Nueva York : The American Risk and Insurance Association, 1964-</publisher>
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<identifier type="issn">0022-4367</identifier>
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<text>01/06/2021 Volumen 88 Número 2 - junio 2021 , p. 325-350</text>
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