Estimating Risk and Risk Aversion in the Automobile Insurance Market

Abstract

<p>This paper is based on the structural model proposed by Cohen and Einav [2007]<br />to estimate the joint distribution of risk and risk aversion in the automobile insurance<br />market. However, while they estimated the model for a single insurer in the Israeli<br />market, we estimated the model by considering the top ve insurers in the Brazilian<br />market at the same time. This difference allowed us to capture the eect of competition<br />on the joint distribution of risk and risk aversion. A counterfactual exercise allowed<br />us to verify that the insurer with the largest market share can implement the optimal<br />contract, while the others do not.</p>

Behavioral Economics and Auto Insurance: The Role of Biases and Heuristics

“…The values obtained are consistent with those reported by Cohen and Einav (2007) in their classic study. But they go against what was reported by Ledo and Lopes (2019), who do not report a significant difference by gender for the Brazilian case. Borghans, Heckman, Golsteyn and Meijers (2009) suggest that a possible explanation for the gender difference is that risk perception is related to cognitive and non-cognitive traits, unequal between genders.…”

“…This group was chosen due to heterogeneous age, education, and income characteristics. These variables are associated with risk aversion, which can influence the purchase of insurance (Ledo & Lopes, 2019). This work is divided into five sections, including this brief introduction.…”

Economia Comportamental e Seguros de Automóveis: O Papel dos Vieses e Heurísticas

“…Esse grupo foi escolhido por ser um conjunto com características heterogêneas de idade, escolaridade e renda. Essas variáveis estão associadas à aversão ao risco, característica que pode influenciar a aquisição de seguros (Ledo & Lopes, 2019).…”