CESifo Seminar Series: Competitive Failures in Insurance Markets

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Leading international economists provide insights into the economic analysis of insurability limits, focusing on adverse selection and moral hazard. Risk sharing is crucial for risk-averse consumers and essential for investment and entrepreneurship. While the standard economic model suggests that competition in insurance markets should ensure all individual risks are insured, many diversifiable risks remain unprotected, including environmental, catastrophic, and technological risks. This volume explores why competitive insurance markets often fail to deliver efficient insurance levels, attributing this to asymmetric information. Adverse selection and moral hazard are key factors explaining these market failures and the necessity for public intervention. The contributors present theoretical models and empirical analyses of insurance markets, including health and non-health insurance, across various countries such as Australia, Sweden, Switzerland, and the United States. The work highlights the complexities of risk exchange in modern economies and the challenges faced in achieving effective risk-sharing arrangements.