Property Coinsurance
 The policies will have the same premium if the areas under the curves in the bottom-most wealth distribution graphic are equal to each other. Assuming that the insured is risk averse and the premiums for the policies are the same, the insured will prefer the less "disperse" wealth distribution curve, which ends up always being the curve generated by an insurance policy with a coinsurance requirement. Professor Venezia's original article setting forth this model may be found in The Journal of Risk and Insurance, 55(2) 1988 pp. 307-314. The graphics go black if the constraint  is violated.The top panel contains an inset identifying the fraction of property value insured when coinsurance is present that will cost the insured the same premium as the policy with a lower fraction of property value insured but without coinsurance. The policy with coinsurance will yield a risk averse insured greater utility than the equally priced policy without coinsurance.  "Property Coinsurance" from The Wolfram Demonstrations Project http://demonstrations.wolfram.com/PropertyCoinsurance/ Contributed by: Seth J. Chandler | ||||||||||||||
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