A significant loss of income can have a negative impact on households who are forced to reduce their consumption of some particular staple goods. This can lead to health issues and consequently generates significant costs for society. In order to prevent these negative consequences, we suggest that consumers can buy an insurance to have a sufficient amount of staple good in case they lose a part of their income. We develop a two-period/two-good Principal-Agent problem with adverse selection and endogenous reservation utility to model an insurance with in kind benefits. This model allows us to obtain semi-explicit solutions for the insurance contract and is applied to the context of fuel poverty  .
An income loss can have a negative impact on households , forcing them to reduce their consumption of some staple goods. This can lead to health issues and , consequently, generate significant costs for society. We suggest that consumers can, to prevent these negative consequences, buy insurance to secure sufficient consumption of a staple good if they lose part of their income. We develop a two-period/two-good principal-agent problem with adverse selection and endogenous reservation utility to model insurance with in-kind benefits. This model allows us to obtain semi-explicit solutions for the insurance contract and is applied to the context of fuel poverty . For this application, our model allows to conclude that, even in the least efficient scenario from the households point of view, i.e., when the insurance is provided by a monopoly, this mechanism improves significantly the living conditions of the riskiest households by ensuring them a sufficient consumption of energy .
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A significant loss of income
An income loss
R
who are forced
, forcing them
D
particular
R
consequently generates
, consequently, generate
R
In order
We suggest that consumers can,
R
we suggest that consumers can buy an insurance to have a sufficient amount of staple good in case they lose a
buy insurance to secure sufficient consumption of a staple good if they lose
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Principal-Agent
principal-agent
R
an insurance with in kind
insurance with in-kind
A
. For this application, our model allows to conclude that, even in the least efficient scenario from the households point of view, i.e., when the insurance is provided by a monopoly, this mechanism improves significantly the living conditions of the riskiest households by ensuring them a sufficient consumption of energy