Document Type

Article

Publication Date

2021

Keywords

insurance contract, insurance claim, claim cap, insured loss

Abstract

In this paper, we examine the question of how to devise an optimal insurance claim settlement scheme under the constraint of a cap on the amount of the claim payment. We establish objective functions to maximize the net benefit due to exaggerated claims while at the same time maximizing the total expected wealth of the insured. Then, we establish a dual objective function to minimize the total expected loss, including the perspective of the insurer. Finally, we illustrate applications of our work and provide numerical analysis of it along with an example.

Comments

First published in Mathematics 2021, 9, 3284. https://doi.org/10.3390/math9243284.

This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).

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