Do the Better Insured Cause More Damage? Testing for Asymmetric Information in Car Insurance

Zavadil, Tibor

doi:10.2139/ssrn.2373969

Cited by 6 publications

(7 citation statements)

References 35 publications

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“…Such mixed results have persisted over the years: Kim et al (2009) found robust evidence of asymmetric information in South Korea; Shi, Zhang, and Valdez (2012) found a significant positive relationship between coverage level and risk for experienced drivers in Singapore; Spindler, Winter, and Hagmayer (2014) found evidence of asymmetric information in Germany; but Zavadil (2015) found no evidence of asymmetric information in the Netherlands. These empirical inconsistencies suggest that asymmetric information may well have different impacts on different markets.…”

Section: Introduction Overviewmentioning

confidence: 99%

Decomposing Asymmetric Information in China's Automobile Insurance Market

Gao

Powers

Wang

2016

J of Risk & Insurance

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Distinguishing between adverse selection and moral hazard is a difficult but important issue in insurance economics. In the present work, we model and evaluate the distinct roles of adverse selection, ex ante moral hazard, and ex post moral hazard in China's automobile insurance market. Our econometric analysis supports the following conclusions: (1) the effect of asymmetric information on the probability of claims is significant; (2) the effect of ex ante moral hazard on the probability of claims is not significant, establishing adverse selection as the underlying source of information asymmetry; (3) the effect of asymmetric information (including ex ante moral hazard) on the severity of claims is not significant; and (4) the impact of ex post moral hazard on claim severity is significant for a subset of lower‐coverage policyholders. Consequently, it may be advisable for Chinese automobile insurance companies to allocate greater resources to both underwriting (i.e., selecting policyholders) and auditing claims.

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Section: Introduction Overviewmentioning

confidence: 99%

Decomposing Asymmetric Information in China's Automobile Insurance Market

Gao

Powers

Wang

2016

J of Risk & Insurance

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“…For other European health insurance systems, there is 1 In the health insurance context, medical expenditure data and other medical consumption data, i.e., number of hospital stays or nights, is often used to approximate the occurrence or severity of a loss. 2 In car insurance, the majority of studies have not found evidence of adverse selection (e.g., Chiappori and Salanié, 2000;Kim et al, 2009;Dionne et al, 2001;Zavadil, 2011). Finkelstein and Poterba (2004) find evidence of adverse selection with respect to the choice of different types of annuity insurance policies but not with respect to annuity size.…”

Section: Introductionmentioning

confidence: 99%

Demand and Selection Effects in Supplemental Health Insurance in Germany

Lange

Schiller

Steinorth

2016

Geneva Pap Risk Insur Issues Pract

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SOEPpapers on Multidisciplinary Panel Data Research at DIW BerlinThis series presents research findings based either directly on data from the German SocioEconomic Panel study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.The decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly.Any opinions expressed in this series are those of the author(s) and not those of DIW Berlin.Research disseminated by DIW Berlin may include views on public policy issues, but the institute itself takes no institutional policy positions. Abstract:This paper empirically assesses the selection effects and determinants of the demand for supplemental health insurance that covers hospital and dental benefits in Germany. Our representative dataset provides doctor-diagnosed indicators of the individual's health status, risk attitude, demand for medical services and insurance purchases in other lines of insurance as well as rich demographic and socioeconomic information. Controlling for a wide range of individual preferences, we find evidence of adverse selection for individuals aged 65 and younger for hospital coverage despite initial individual underwriting by insurers. The reverse is true for individuals older than 65; individuals with supplemental hospital coverage are healthier on average. In addition, insurance affinity and income are the most important drivers of the demand for both types of coverage. JEL-Classification: D82, G22, I11

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“…Three articles focus on the role of asymmetric information in autoinsurance. Zavadil (2014) tests for asymmetric information in autoinsurance among senior drivers in the Netherlands using the conditional-correlation approach. The study detects no evidence of asymmetric information in this particular market, which is in contrast to most of the prior literature.…”

Section: Risk Valuationmentioning

confidence: 99%

Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2013 Update

Biener

Eling

Pradhan

2015

Risk Manage Insurance Review

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This article reports the main results of the 2013 Risk Premium Project update, a yearly review of actuarial and finance literature on the theory and empirics of risk assessment for property-casualty insurance. The literature review reveals a broad variety of topics, with a strong leaning toward catastrophe risk, market efficiency, and new valuation techniques. Within the field of catastrophe risk, the role of weather and climate-related risks for the insurance sector is reviewed and both the threats and the opportunities arising from the changing risk landscape are discussed.

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Do the Better Insured Cause More Damage? Testing for Asymmetric Information in Car Insurance

Cited by 6 publications

References 35 publications

Decomposing Asymmetric Information in China's Automobile Insurance Market

Decomposing Asymmetric Information in China's Automobile Insurance Market

Demand and Selection Effects in Supplemental Health Insurance in Germany

Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2013 Update

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