We analyze a two-period competitive insurance market that is characterized by the simultaneous presence of moral hazard and adverse selection with regard to consumer time preferences. It is shown that there exists an equilibrium in which patient consumers use high effort and buy an insurance contract with high coverage, whereas impatient consumers use low effort and buy a contract with low coverage or even remain uninsured. This finding may help to explain why the opposite of adverse selection with regard to risk types can sometimes be observed empirically. Copyright (c) The Journal of Risk and Insurance, 2009.

Although empirical evidence on oligopolistic behavior in some sectors of the insurance industry exists, relatively few theoretical models have been developed. We discuss the cause for this discrepancy, elaborate on the classical oligopoly models and their applicability to the insurance market, and introduce the few models that are specific to the insurance industry. The underlying mechanism in these models is that undercutting a rival makes the pool of risks unattractive and thus, oligopolistic market power can be sustained.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

Brokers play an increasing role in the distribution of reinsurance. In order to analyse reinsurance brokers' advice quality, we employ a model in which a monopoly broker advises cedents to buy a particular one out of similar reinsurance policies that cost the same but differ in details. The broker decides on how much to invest in his advice quality and on the price to charge for his service. We find that the broker's advice quality is generally lower and the price for his service higher than in the social optimum, even in the presence of a potential new entrant.

In an insurance context, moral hazard comprises the phenomenon that having insurance gives the insured an incentive to alter his behavior to the detriment of the insurer. This manifests itself by the insuree employing suboptimal precautionary effort to avoid the loss. We discuss the insurance‐specific moral hazard model and several extensions with regard to many effort levels, continuous loss distribution, multiperiod contracts, and renegotiation.