Abstract If the general level of house prices falls a long way, policymakers may introduce new policies which seek to support prices. This paper considers the effect of such interventions on the valuation of no-negative-equity guarantees (NNEG) in equity release mortgages. I model interventions by a reflecting barrier expressed as a fraction of the current level of house prices. Reflection at the barrier is instantaneous, so the no-arbitrage property is preserved, and hence risk-neutral valuation of NNEG is possible. The reflecting barrier can alternatively be justified as a representation of the different economic nature of the underlying housing (and particularly freehold land) assets in NNEG valuations, compared with the underlying equity assets in many other option valuations.

This article suggests that from a public policy perspective, some degree of adverse selection may be desirable in some insurance markets. The article suggests that a public policymaker should consider the criterion of "loss coverage," and that in some markets a policymaker may wish to regulate risk classification with a view to increasing loss coverage. Either too much or too little risk classification may reduce loss coverage. The concept is explored by means of examples and formulaic and graphical interpretations. An application to the UK life insurance market is considered.

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Around the millennium there was extensive debate in the United Kingdom about the possible use of predictive genetic tests by insurance companies. Many insurance experts, geneticists, and public policymakers appeared to believe that genetic test results would soon become widely used by the insurance industry. This expectation has not been borne out. This article outlines the history of exaggerated perceptions of the significance of genetic test results to insurance, with particular reference to the United Kingdom, suggesting reasons why they arose and also why they have declined. The article concludes with some speculation about how policy on genetics and insurance might develop in future.

This paper investigates the effects of high or low fair-premium demand elasticity in an insurance market where risk classification is restricted. The effects are represented by the equilibrium premium, and the risk-weighted insurance demand or “loss coverage”. High fair-premium demand elasticity leads to a collapse in loss coverage, with an equilibrium premium close to the risk of the higher-risk population. Low fair-premium demand elasticity leads to an equilibrium premium close to the risk of the lower-risk population, and high loss coverage – possibly higher than under more complete risk classification. The demand elasticity parameters which are required to generate a collapse in coverage in the model in this paper appear higher than the values for demand elasticity which have been estimated in several empirical studies of various insurance markets. This offers a possible explanation of why some insurance markets appear to operate reasonably well under community rating, without the collapse in coverage which insurance folklore suggests.