A Primer on the Economics of Conflicts of Interest in in Liability Insurance
"There is a well‑known conflict of interest between #liabilityinsurance #insurers and policyholders with respect to the decision to settle or litigate a #claim. This short note provides a simple graphical explanation for the problem and grounds it in the way the structure of the parties’ payouts drives their attitudes towards #risk. An optional appendix links the insights to the elementary mechanics of financial options.