The Economics of Risk and Insurance

Written for advanced undergraduate and master’s level courses, this book builds from a base of asymmetric information issues to discuss a wide array of topics and is illustrated with some timely examples.

• Covers diverse issues such as risk aversion, expected utility, and moral hazard within the pure theory of insurance
• Provides a clear exposition of the necessary mathematics, a feature which cannot be found in readers on the topic
• Utilizes an undergraduate economics major level of math
• Uses the simplest economic models possible to keep the text intuitive
• Introduces more mathematically complex techniques such as basic optimization for students wishing to 'go further' in their analysis

0. Introduction.

Part I: Fundamentals of Insurance.

1. Risk and Expected Utility.

2. Risk Aversion and Riskiness.

3. Principles of Insurance: Risk Sharing and Transfer.

Part II: Demand for Insurance and Insurance Contract.

4. Risk Aversion and Insurance.

5. Corporate Insurance and Risk Management.

6. Liability and Insurance.

Part III: Information and Insurance Contract.

7. Basic Adverse Selection Models.

8. Advanced Topics in Adverse Selection.

9. Moral Hazard.

10. Ex Post Moral Hazard and Fraud.

Part IV: Insurance Market.

11. Insurer Organization.

12. Competition in the Insurance Market.

13. Insurance Cycle and Capacity.

Part V: Insurer Management.

14. Insurance Distribution Systems.

15. Insurance Pricing.

S. Hun Seog is Professor of Finance and Insurance at the Graduate School of Business, Seoul National University. He received his PhD in Risk and Insurance from the Wharton School. His research areas include the economics of risk and insurance, corporate finance, and their applications. His academic papers have been published in Journal of Risk and Insurance, Geneva Papers on Risk and Insurance Theory, Asia-Pacific Journal of Risk and Insurance, International Economic Review, Marketing Science, and European Journal of Operational Research.

The Economics of Risk and Insurance covers diverse issues such as risk aversion, expected utility, and information asymmetry within the pure theory of insurance. It then expands upon this framework to include crucial applied issues such as insurer’s organization, marketing channels, and insurance fraud, summarizing the important results in relevant literature. By keeping the level of math used in the analyses at the undergraduate economics-major level, and by providing proofs with fully explicated results, Seog has written a text that is highly intuitive to students. "Seog’s book provides a nice primer on the theoretical portion of insurance economics while linking to the empirical studies in the field. Its solid list of reference for further reading for each topic will help students as they move through their course of study and develop their own research stream. A great reference for any doctoral student in the area."
—Kathleen A. McCullough, Florida State University

"The more I read this book, the more I like it. It provides theoretical analyses for a complete set of insurance topics, and is easy to read even though the concepts are complex. Every insurance Ph.D. student needs to read this book."
—Gene C. Lai, Washington State University