Endogenizing loss prevention and risk sharing in P2P insurance: a unified mean–variance framework
Endogenizing loss prevention and risk sharing in P2P insurance
Peer-to-peer (P2P) insurance promises lower costs and better alignment of interests by having small groups of policyholders directly share risk. Yet full pooling can destroy prevention incentives under moral hazard, while self-insurance sacrifices diversification. In this talk, we develop a unified mean–variance framework that endogenizes both the pooling matrix and the effort levels in one joint optimization.