The efficiency of voluntary risk classification in insurance markets

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<subfield code="a">Crocker, Keith J.</subfield>
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<subfield code="a">The efficiency of voluntary risk classification in insurance markets</subfield>
<subfield code="c">Keith J. Crocker, Nan Zhu</subfield>
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<subfield code="a">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.</subfield>
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<subfield code="a">Eficiencia operacional</subfield>
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<subfield code="a">Mercado de seguros</subfield>
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<subfield code="a">Cálculo actuarial</subfield>
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<subfield code="a">Zhu, Nan</subfield>
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<subfield code="t">The Journal of risk and insurance</subfield>
<subfield code="d">Nueva York : The American Risk and Insurance Association, 1964-</subfield>
<subfield code="x">0022-4367</subfield>
<subfield code="g">01/06/2021 Volumen 88 Número 2 - junio 2021 , p. 325-350</subfield>