Does private information affect the insurance risk?: evidence from the automobile insurance market
2010 (English)Report (Other academic)
We empirically investigate the effect of policyholders private information of risky traffic behavior on automobile insurance coverage and ex post risk. We combine our insurance companys information with private information data that is not accessible to the insurance company. We show that being unable to reject the null of zero correlation is not necessarily consistent with symmetric information in the automobile insurance market. Our results are twofold: In contrast to much of the previous work we find a positive significant correlation for three groups of policyholders, consistent with the adverse selection prediction. We furthermore find that private information about risky traffic behavior increases ex post risk while it both increases and decreases the demand for extensive insurance. This supports our hypothesis that adverse and propitious is present simultaneously in this market.
Place, publisher, year, edition, pages
Borlänge: Statens väg- och transportforskningsinstitut, 2010. , 35 p.
, Working Papers, Swedish National Road & Transport Research Institute (VTI), 2010:1
Insurance, Car, Risk, Driver, Risk taking, Behaviour, Offence, Statistical analysis
Research subject Road: Traffic safety and accidents, Road: Accident costs
IdentifiersURN: urn:nbn:se:vti:diva-712OAI: oai:DiVA.org:vti-712DiVA: diva2:669412