The Economics of Liability Insurance

Ambrose, Jan M.; Carroll, Anne; Regan, Laureen

doi:10.1007/978-1-4614-0155-1_12

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Costly Insurance1

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2013

2024

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Cited by 8 publications

(1 citation statement)

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“…20 Administrative costs (excluding risk loading and loss adjustment expenses) generally amount to 30-50% of premiums (see Harrington and Niehaus (2003), p. 146). Incidentally, note that correlation will entail a deductible, as commonly observed in practice (see Ambrose et al (2013)).…”

Section: Costly Insurancementioning

confidence: 86%

Correlated Accidents

Franzoni

2016

Am Law Econ Rev

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This paper investigates cases in which harms are statistically correlated. When parties are risk averse, correlation plays an important role in the choice between liability rules. Specifically, positively correlated harms favor a liability rule that spreads the risk over a multitude of parties, as in the negligence rule. Negatively correlated harms favor a liability rule that pools risks together, as in strict liability. The same applies when parties can purchase costly insurance (first party or third party). This policy recommendation is in line with current products liability law, which places design defects and warning failures under a de facto negligence regime.

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Section: Costly Insurancementioning

confidence: 86%