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Insurance Market Failures

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Encyclopedia of Law and Economics

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Abstract

Insurance market is characterized by failures that impose particular negative consequences; given the failures, different remedies may improve the market outcome. On one hand, the insurance market is characterized by asymmetric information, i.e. moral hazard and adverse selection, and to correct the consequent severe market failures, monitoring and risk classification can be implemented. On the other hand, the insolvency issue: given the enormous amounts of funds in the hands of insurance companies, their default would have an extreme impact, and regulation is necessary to guarantee the payback for policyholders and beneficiaries.

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Author information

Authors and Affiliations

  1. Department of Management, Economics, Mathematics and Statistics, University of Salento, Lecce, Italy

    Donatella Porrini

Authors
  1. Donatella Porrini
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Correspondence to Donatella Porrini .

Editor information

Editors and Affiliations

  1. MRE and University of Montpellier, Montpellier, France

    Alain Marciano

  2. Faculté d’Economie, Université de Montpellier and LAMETA-UMR CNRS, Montpellier, France

    Alain Marciano

  3. DiGSPES, University of Eastern Piedmont, Alessandria, Italy

    Giovanni Battista Ramello

  4. IEL, Torino, Italy

    Giovanni Battista Ramello

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© 2019 Springer Science+Business Media, LLC, part of Springer Nature

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Porrini, D. (2019). Insurance Market Failures. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7753-2_615

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