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The Insurance Industry as a Complex Social System: Competition, Cycles, and Crises

[error in script] (2018). The Insurance Industry as a Complex Social System: Competition, Cycles, and Crises. Journal of Artificial Societies and Social Simulation, 21(4), 2.. doi: 10.18564/jasss.3819

Abstract

Insurance is critical to the fabric of modern societies and economies, but the insurance industry continues to suffer deep cycles and periodic crises. These have a great socio-economic cost as insurance cover can become prohibitively expensive or unavailable, damaging livelihoods, property, belongings and employment. These phenomena are poorly understood. A set of socio-anthropological and behavioral hypotheses have recently been posited. We investigate these explanations by means of an agent-based simulation model. The model is parameterized on actual property insurance industry data and is carefully validated. Our main result is that simple behavior and interaction at the individual level can result in complex cyclical industry-wide behavior. Heterogeneity and interaction at a micro level must therefore be understood if cycles and crises in the insurance industry are to be managed and prevented.

Publication Type: Article
Additional Information: This is the accepted manuscript of an article published in the 'Journal of Artificial Societies and Social Simulation.'
Publisher Keywords: Underwriting Cycle, Insurance Crisis, Theory of Plural Rationalities, Underwriter, Actuary
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Cass Business School > Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/20321
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