Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 10/02: Full Coverage for Minor, Recurrent Losses?

Sjur Didrik Flåm ()
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Sjur Didrik Flåm: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway

Abstract: This note looks at insurance of minor, recurrent losses. The main concern is with efficiency properties of full coverage. As motivation and running example we concider a regime, currently operative in several European countries, that offers employees complete wage reimbursement during short spell sickness. Assembled here are some arguments speaking against this sort of insurance policy.

Keywords: risk sharing; coinsurance; deductible; non-insurable risk; Pareto efficiency; mutual insurance; arbitrage; adverse selection; moral hazard.

JEL-codes: D81; I28

11 pages, April 9, 2002

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