EXPLAINING THE DEMAND FUNCTION OF ENDOWMENT ASSURANCE (A THEORETICAL APPROACH)

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EBADI JAFAR; MAHDAVI KELISHOMI GHADIR; HAERI MOJTABA

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Journal: IRANIAN JOURNAL OF INSURANCE RESEARCH (SANAAT-E-BIMEH) Year:2016 | Volume:31 | Issue:2 (122) Page(s): 105-127

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Title

EXPLAINING THE DEMAND FUNCTION OF ENDOWMENT ASSURANCE (A THEORETICAL APPROACH)

Author(s)

EBADI JAFAR | MAHDAVI KELISHOMI GHADIR | HAERI MOJTABA | Issue Writer Certificate

Keywords

ENDOWMENT ASSURANCEQ1

PREMIUM THRESHOLDQ1

EXPECTED UTILITY THEORYQ1

ADVERSE SELECTIONQ2

ADVANTAGEOUS SELECTIONQ1

Abstract

This paper proposes a theoretical framework for finding type of the selection theory in insurance market. This issue is one of the most important subjects relating to determination of appropriate premium and more development of insurance industry in the economy of the countries. For this purpose, first, the demand function of ENDOWMENT ASSURANCE for given individual is extracted by utility maximization. Then, potential customers of insurance company are divided into low risk and high risk groups and the demand functions for these groups are drawn out by numerical simulation. Taking into account the entry and exit of people to market with help of threshold premium, led to this finding that the demand functions of endowment were kinked. Finally, the selection theory that dominates the ENDOWMENT ASSURANCE market is determined by comparing the demand functions of different group of customers. The results show that the selection theory could be strong or weak ADVERSE SELECTION with respect to premium amount. Since the decrease of premium reduces the difference between the demand function of the two, that can be introduced as a tool to reduce power of ADVERSE SELECTION in ENDOWMENT ASSURANCE market.

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APA: Copy

EBADI, JAFAR, MAHDAVI KELISHOMI, GHADIR, & HAERI, MOJTABA. (2016). EXPLAINING THE DEMAND FUNCTION OF ENDOWMENT ASSURANCE (A THEORETICAL APPROACH). IRANIAN JOURNAL OF INSURANCE RESEARCH (SANAAT-E-BIMEH), 31(2 (122)), 105-127. SID. https://sid.ir/paper/100962/en

Vancouver: Copy

EBADI JAFAR, MAHDAVI KELISHOMI GHADIR, HAERI MOJTABA. EXPLAINING THE DEMAND FUNCTION OF ENDOWMENT ASSURANCE (A THEORETICAL APPROACH). IRANIAN JOURNAL OF INSURANCE RESEARCH (SANAAT-E-BIMEH)[Internet]. 2016;31(2 (122)):105-127. Available from: https://sid.ir/paper/100962/en

IEEE: Copy

JAFAR EBADI, GHADIR MAHDAVI KELISHOMI, and MOJTABA HAERI, “EXPLAINING THE DEMAND FUNCTION OF ENDOWMENT ASSURANCE (A THEORETICAL APPROACH),” IRANIAN JOURNAL OF INSURANCE RESEARCH (SANAAT-E-BIMEH), vol. 31, no. 2 (122), pp. 105–127, 2016, [Online]. Available: https://sid.ir/paper/100962/en

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