Cap & Trap and alternatives in price discrimination
Author:
Hirsh ,
Hirsh Imogen1,
Assa Hirbod2
Affiliation:
1. Hiscox Insurance (United Kingdom)
2. University of Liverpool (United Kingdom)
Abstract
Cap and Trap is a mechanism for smoothing rate change at policy renewal. However, this method still can expose an insurance company to a potential conduct risk. Individual clients could be overcharged or undercharged on an individual basis for their risk. This paper discusses alternative methods to better smooth prices with the aim of reducing the effect of price discrimination.
Publisher
Instituto de Actuarios Españoles