Journals

Journal of Risk and Insurance

The Journal of Risk and Insurance (JRI) publishes theoretical and empirical research on the topics of insurance economics and risk management. Research in the JRI informs practice, policy-making, and regulation in insurance markets as well as corporate and household risk management. It is currently indexed by the American Economic Association’s Economic Literature Index, RePEc, the Social Sciences Citation Index, and others. Issues of the JRI, from volume one to volume 82 (2015), are available online through JSTOR. Recent issues of the JRI are available through Wiley Online Library. A subscription to the Journal of Risk and Insurance is one of the many benefits of ARIA Membership.

JRI has opened a call for papers. Learn more here.

Journal of Risk and Insurance

Early View

An examination of life insurance policy surrender and loan activity

Extant literature has explored policyowner decision‐making as it relates to both life insurance policy surrender and borrowing activity. However, researchers have not yet examined why individuals may select one option over the other. In this study, we investigate common hypotheses related to policy surrender and loan activity using approaches which allow us to examine the two options jointly while also accounting for the multidimensional nature of the decision‐making process. We offer evidence consistent with the emergency fund, alternative funds, and policy replacement hypotheses as they relate to the decision to either surrender a policy or take out a policy loan and find that differential effects exist between the two options. In particular, our findings suggest that households tend to surrender their cash value policies when longer‐term financial needs arise while temporary needs are more likely addressed with loans which keep the policy in force, each consistent with rational household decision‐making.

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Journal of Risk and Insurance

Early View

The efficiency of voluntary risk classification in insurance markets

It has been established that categorical discrimination based on observable characteristics such as gender, age, or ethnicity enhances efficiency. We consider a different form of risk classification when there exists a costless yet imperfectly informative test of risk type, with the test outcome unknown to the agents ex ante. We show that a voluntary risk classification in which agents are given the option to take the test always increases efficiency compared with no risk classification. Moreover, voluntary risk classification also Pareto dominates a regime of compulsory risk classification in which all agents are required to take the test.

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Journal of Risk and Insurance

Early View

Simultaneous borrowing of information across space and time for pricing insurance contracts: An application to rating crop insurance policies

Changing climate and technology can often lead to nonstationary losses across both time and space for a variety of insurance lines including property, catastrophe, health, and life. As a result, naive estimation of premium rates using past losses will tend to be biased. We present three successively flexible data‐driven methodologies to nonparametrically smooth across both space and time simultaneously, thereby appropriately incorporating possibly nonidentically distributed data into the rating process. We apply these methodologies in estimating U.S. crop insurance premium rates. Crop insurance, with global premiums totaling $4.1 trillion in 2018, is an interesting application as losses exhibit both temporal and spatial nonstationarity. We find significant borrowing of information across both time and space. We also find all three methodologies improve both the stability and accuracy of crop insurance premium rates. The proposed methods may be of relevance for other lines of insurance characterized by spatial and/or temporal nonstationary losses.

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Risk Management & Insurance Review

Risk Management and Insurance Review publishes high-quality applied research, well-reasoned opinion and discussion in the field of risk and insurance. Additionally, the Review provides a repository of high-caliber model lectures in risk and insurance, along with articles discussing and evaluating instructional techniques. A subscription to the Risk Management and Insurance Review is one of the many benefits of ARIA Membership.

Risk Management & Insurance Review

Volume 24, Issue 1

China’s nonlife insurance market: New insights from the China Insurance Yearbook

China’s nonlife insurance market is among the largest in the world and is ripe for policy‐relevant research. The China Insurance Yearbook is well‐positioned to support this study. This “Data Insight” provides an overview of the China Insurance Yearbook and includes graphical summaries of yearbook data. The author discusses implications for the study of nonlife insurance in China and highlight new insights that might be gained from an analysis of yearbook data.

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Risk Management & Insurance Review

Volume 24, Issue 1

Connected and autonomous vehicle injury loss events: Potential risk and actuarial considerations for primary insurers

The introduction of connected and autonomous vehicles (CAVs) to the road-environment ecosystem will change the typology of crash frequency and severity. CAVs are expected to optimise the safety of road users and the wider environment, while alleviating traffic congestion and retaining a high level of occupant comfort. The net result is a reduction in the frequency of motor vehicle collisions, while mitigating the severity of incidents that are unavoidable. A changing risk ecosystem will introduce new challenges for motor insurers. Prior studies have highlighted the economic benefit provided by significant reductions in the frequency and severity of hazardous events. This economic benefit, however, will be partially offset by the economic detriment incurred by emerging risks and the increased scrutiny placed on existing risks. The authors of this study posit a ‘tail-risk’ scenario that an introduction of these technologies could result in a larger relative rate of insurance claims that are currently characterised as tail-risk events, i.e. low-frequency, high-severity loss events.

 

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Risk Management & Insurance Review

Upcoming

Pandemic risk: Impact, modeling, and transfer

COVID‐19 has proven that pandemic risk deems to the type of catastrophe risk that needs to be treated seriously, by both society and the insurance industry. A key element to measure, manage, and transfer pandemic risk is the modeling capability. This paper first reviews the insured loss from COVID‐19 and the impact on the insurance industry. Then, current pandemic risk modeling capabilities and how insurance industry uses these models are evaluated. Some suggestions are made in terms of how these models can be improved in the future and how they can assist in insuring the pandemic risk. Finally, the nonmodeling elements of pandemic risk transfer and the government’s role are discussed.

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