towards reducing information asymmetry issues.
- Utmost good faith:-Within a stipulated period, the insurer can repudiate the contract if any intentional misstatement is found in the contract
- Renewal discount/No claim bonus:- The lure of getting steep renewal discounts for good track record, may deter petty claims.
- Average clause:- This encourages the insured to go for 100%+ insurance, so that when loss occurs he is totally covered.
- group insurance discount/mandatory insurance cheaper since lemons problem absent.
- Universal insurance-Adverse selection problem is avoided here.
- Treaty reinsurance over facultative reinsurance(optional;- It just means that neither party can pick and choose the polices which they will submit/accept for reinsurance. This ensures that cherry picking is minimized by informed originator.
- Use of insurance brokers to give confidence to both client(about rates) and underwriters(about client risk). The primary role of the broker is to inspire in underwriters, on a case-by-case basis, the conﬁdence to accept the risk presented. Market now works on guide wordings that can be modiﬁed to suit a client`s needs. These are negotiated accordingly and the risk transfer negotiated with skill in structuring policy wordings acceptable to the insurer and providing protection to the client.