Substitution between insurance and self-insurance: A property robust to information asymmetry and ambiguity
Substituabilité entre assurance et auto-assurance : une propriété robuste à l'asymétrie d'information et à l'ambiguïté
Résumé
We study the effect of asymmetric information about self-insurance effort on the substitution property between insurance and self-insurance. We first examine the effect of the insurer's ability to observe the policyholder's self-insurance effort in a risk context. We then extend the analysis to a unilateral ambiguous context where only the policyholder has an ambiguous knowledge of his risk exposure. We find that information on the level of effort has a strategic dimension neither in the risk context nor in the ambiguous one: policyholders choose identical levels of effort, be the effort observable or not. As a result, the substitutability property between insurance and self-insurance is robust to both asymmetric information and ambiguity. The implications for government and insurers are discussed.