Download This PaperA Primer on the Economics of Conflicts of Interest in in Liability Insurance
19 Pages Posted: 9 Aug 2023 Last revised: 24 Sep 2023
Date Written: September 24, 2023
Abstract
There is a well-known conflict of interest between liability insurers and policyholders with respect to the decision to settle or litigate a claim. This short note provides a simple graphical explanation for the problem and grounds it in the way the structure of the parties’ payouts drives their attitudes towards risk. An optional appendix links the insights to the elementary mechanics of financial options.
Keywords: liability insurance, conflicts of interest, settlement
JEL Classification: G22, K39, K41
Suggested Citation: Suggested Citation
Siegelman, Peter, A Primer on the Economics of Conflicts of Interest in in Liability Insurance (September 24, 2023). Connecticut Insurance Law Journal, 2024, Available at SSRN: https://ssrn.com/abstract=4534225 or http://dx.doi.org/10.2139/ssrn.4534225
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