Cap & Trap and alternatives in price discrimination

Imogen Hirsh; Hirbod Assa

doi:10.26360/2020_5

Authors

Imogen Hirsh Hiscox Insurance (United Kingdom)
Hirbod Assa University of Liverpool (United Kingdom)

DOI:

https://doi.org/10.26360/2020_5

Keywords:

Cap and Trap, price discrimination, smooth pricing

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.

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References

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