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Abstract

News — The literature on insurance pricing fairness is anchored in the duality of solidarity pricing and individualized pricing. However, within both these pricing frameworks, conflicting principles of fair pricing emerge. I explain that such conflicts arise because the capital insurers need to pay consumers’ claims is a shared asset, and the total volatility consumers contribute to the insurer is non-linear. Since studies show that enacting transparency in pricing enhances consumer acceptance of the resulting prices, instead of pursuing idealized but contested fairness, I argue for pricing that insurance consumers perceive and accept as fair. I conclude with a hypothetical insurance pricing simulator in the form of a first-person game.