Risky Business: Why Insurance Markets Fail and What to Do About It

An engaging and accessible examination of what ails insurance markets--and what to do about it--by three leading economists

Why is dental insurance so crummy, why is pet insurance so expensive, and why does your auto insurer ask for your credit score? The answer to these questions lies in understanding insurance as a selection market. Unlike a normal goods market--for instance, a grocer who doesn't care who is buying broccoli at the store provided it is paid for--in selection markets, businesses are more careful in choosing their customers because some customers are more expensive than others.
 
Unraveling the mysteries of insurance markets, Liran Einav, Amy Finkelstein, and Ray Fisman explore such issues as why insurers want to know so much about us and whether we should let them obtain this information; why insurance entrepreneurs often fail (and some tricks that may help them succeed); and whether we'd be better off with government-mandated health insurance or instead letting businesses, customers, and markets decide who gets coverage and at what price. With insurance at the center of divisive debates about privacy, equity, and the appropriate role of government, this book offers a clear explanation of some of the critical business and policy issues you've often wondered about, as well as some you haven't yet considered.