The utility of deductibles from the insurer's point of view

The relationship between the premiums for deductible cover and for full cover are analyzed with respect to the utility for the insurer. Theorem 1 shows that within natural bounds for the premiums neither form of coverage is generally preferred by all insurers. Theorems 2–4 indicate that in many realistic cases a deductible cover requires a higher risk loading factor by the insurer than a full insurance cover. Theorem 2(b) also contains an exception to this rule.