The impact of profit-regulated insurance on mitigating contagion risks in networks

Although subsidies can enhance insurance efficiency in mitigating epidemics, dependence on government funding raises concerns about long-term sustainability. This paper proposes a novel profit-regulated PDPI (precaution and dynamic post-indemnity) insurance model (PDPI-PR), designed to improve risk prevention and encourage insurance participation through the dynamic regulation and reallocation of insurer profits. This reallocation is determined by the scale of epidemics and the proportion of free riders. The effectiveness of the PDPI-PR insurance model is assessed through a networked vaccination game built on the susceptible-infected-recovered (SIR) model. Simulations conducted on scale-free networks demonstrate that the PDPI-PR insurance model substantially improves the efficiency of the PDPI insurance in mitigating risk propagation. Furthermore, optimization strategies are proposed to balance risk mitigation, social costs, and insurer profits in scenarios where insurer profits decline or social costs increase. In addition, the effectiveness of the PDPI-PR insurance model on Holme-Kim networks is also investigated. Overall, this study introduces an innovative approach to enhancing insurance effectiveness without requiring external funding, thereby providing valuable insights for future research and practical implementation.