The Optimal Insurance Contracts under some Particular Moral Hazard

This paper employs the principal agent theory to research the optimal insurance contracts under some particular moral hazard where private action of the insured only influence the probability of the accident. We construct principal\|agent models for the moral hazard. The model illustrates the most fundamental result: the market responds to the moral hazard with partial insurance coverage, and the final loss suffered by insured individuals is indifferent with the total loss aroused by the accidents, through the insurance policy we could gain the Parito\|optimal risk sharing.