Value of information sharing in marine mutual insurance

With empirical evidence from marine mutual insurance (MMI), an impulse feedback model is constructed to address how information sharing can help increase both the social welfare and the efficiency of operation of the MMI system. Focusing on information sharing, this paper considers the premium policy optimization of a pure (i.e., non-stock consideration) mutual insurance system with a homogeneous market of identical members. Our findings confirm that the principle of information sharing can be attained under equal-risk pooling, but not necessarily under unequal-risk pooling, and reveal that quantifiable differences exist in the valuation of information sharing under the two schemes of risk pooling. It indicates that the key to successful MMI is equal-risk pooling. Algorithms are developed to compute the value of information sharing by solving the HJB equations and quasi-variational inequalities. It determines that information sharing can achieve best social welfare as well as efficient operation of a P&I Club. The conclusion provides a scientific basis for both managerial strategy and competition regulation. The findings are also applicable to a wide range of reserve and inventory management problems.