Insurance premiums and demand function

Efim Bronshtein, Russie

Dependence of demand for policies on the size of the premium is in our opinion an important factor which an insurer must take into account. Demand functions are analyzed. It is natural to count that such functions are decreasing, logarithmic convex and equal 0 for high enough premiums.The problem of assignment of premiums at which the average profit of the insurer is maximal for the given risk level is investigated for the static model. It is established, that the risk cannot be arbitrary small. The analysis shows, that in many cases it is necessary to choose the smallest possible premiums for achievement of this purpose. Some elementary functions of demand are analyzed.Within the framework of dynamic model for maximization of adjustment coefficient (i.e. Lundberg estimate of nonruin probability) premiums should be the greatest possible.
Date: 30 May - Time: 10:30 to 12:00 - Room: 241
Theme: 3.B. High severity risks and insurability