Testing for Hidden Information and Action in Automobile Insurance Market

I test the presence of hidden information and action in the automobile insurance market using a data set from several Colombian insurers. To identify the presence of hidden information I find a common knowledge variable providing information on policyholder s risk type which is related to both ex...

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Autor Principal: García Rubiano, Juan Pablo
Otros Autores: Bardey, David
Formato: Tesis de maestría (Master Thesis)
Lenguaje:Español (Spanish)
Publicado: Universidad del Rosario 2009
Materias:
Acceso en línea:http://repository.urosario.edu.co/handle/10336/2416
id ir-10336-2416
recordtype dspace
spelling ir-10336-24162019-09-19T12:37:01Z Testing for Hidden Information and Action in Automobile Insurance Market García Rubiano, Juan Pablo Bardey, David Insurance Adverse selection Moral hazard Empirical tests of contract theory Seguros de automóviles Seguros de responsabilidad civil Pólizas de seguros de automóviles Economía Insurance Adverse selection Moral hazard Empirical tests of contract theory I test the presence of hidden information and action in the automobile insurance market using a data set from several Colombian insurers. To identify the presence of hidden information I find a common knowledge variable providing information on policyholder s risk type which is related to both experienced risk and insurance demand and that was excluded from the pricing mechanism. Such unused variable is the record of policyholder s traffic offenses. I find evidence of adverse selection in six of the nine insurance companies for which the test is performed. From the point of view of hidden action I develop a dynamic model of effort in accident prevention given an insurance contract with bonus experience rating scheme and I show that individual accident probability decreases with previous accidents. This result brings a testable implication for the empirical identification of hidden action and based on that result I estimate an econometric model of the time spans between the purchase of the insurance and the first claim, between the first claim and the second one, and so on. I find strong evidence on the existence of unobserved heterogeneity that deceives the testable implication. Once the unobserved heterogeneity is controlled, I find conclusive statistical grounds supporting the presence of moral hazard in the Colombian insurance market. I test the presence of hidden information and action in the automobile insurance market using a data set from several Colombian insurers. To identify the presence of hidden information I find a common knowledge variable providing information on policyholder s risk type which is related to both experienced risk and insurance demand and that was excluded from the pricing mechanism. Such unused variable is the record of policyholder s traffic offenses. I find evidence of adverse selection in six of the nine insurance companies for which the test is performed. From the point of view of hidden action I develop a dynamic model of effort in accident prevention given an insurance contract with bonus experience rating scheme and I show that individual accident probability decreases with previous accidents. This result brings a testable implication for the empirical identification of hidden action and based on that result I estimate an econometric model of the time spans between the purchase of the insurance and the first claim, between the first claim and the second one, and so on. I find strong evidence on the existence of unobserved heterogeneity that deceives the testable implication. Once the unobserved heterogeneity is controlled, I find conclusive statistical grounds supporting the presence of moral hazard in the Colombian insurance market. 2009-12-01 2011-05-03T17:44:13Z info:eu-repo/semantics/masterThesis info:eu-repo/semantics/acceptedVersion TMEC 0004 2011 http://repository.urosario.edu.co/handle/10336/2416 spa http://creativecommons.org/licenses/by-nc-nd/2.5/co/ info:eu-repo/semantics/openAccess application/pdf Universidad del Rosario Maestría en Economía Facultad de Economía instname:Universidad del Rosario reponame:Repositorio Institucional EdocUR
institution EdocUR - Universidad del Rosario
collection DSpace
language Español (Spanish)
topic Insurance
Adverse selection
Moral hazard
Empirical tests of contract theory
Seguros de automóviles
Seguros de responsabilidad civil
Pólizas de seguros de automóviles
Economía
Insurance
Adverse selection
Moral hazard
Empirical tests of contract theory
spellingShingle Insurance
Adverse selection
Moral hazard
Empirical tests of contract theory
Seguros de automóviles
Seguros de responsabilidad civil
Pólizas de seguros de automóviles
Economía
Insurance
Adverse selection
Moral hazard
Empirical tests of contract theory
García Rubiano, Juan Pablo
Testing for Hidden Information and Action in Automobile Insurance Market
description I test the presence of hidden information and action in the automobile insurance market using a data set from several Colombian insurers. To identify the presence of hidden information I find a common knowledge variable providing information on policyholder s risk type which is related to both experienced risk and insurance demand and that was excluded from the pricing mechanism. Such unused variable is the record of policyholder s traffic offenses. I find evidence of adverse selection in six of the nine insurance companies for which the test is performed. From the point of view of hidden action I develop a dynamic model of effort in accident prevention given an insurance contract with bonus experience rating scheme and I show that individual accident probability decreases with previous accidents. This result brings a testable implication for the empirical identification of hidden action and based on that result I estimate an econometric model of the time spans between the purchase of the insurance and the first claim, between the first claim and the second one, and so on. I find strong evidence on the existence of unobserved heterogeneity that deceives the testable implication. Once the unobserved heterogeneity is controlled, I find conclusive statistical grounds supporting the presence of moral hazard in the Colombian insurance market.
author2 Bardey, David
author_facet Bardey, David
García Rubiano, Juan Pablo
format Tesis de maestría (Master Thesis)
author García Rubiano, Juan Pablo
author_sort García Rubiano, Juan Pablo
title Testing for Hidden Information and Action in Automobile Insurance Market
title_short Testing for Hidden Information and Action in Automobile Insurance Market
title_full Testing for Hidden Information and Action in Automobile Insurance Market
title_fullStr Testing for Hidden Information and Action in Automobile Insurance Market
title_full_unstemmed Testing for Hidden Information and Action in Automobile Insurance Market
title_sort testing for hidden information and action in automobile insurance market
publisher Universidad del Rosario
publishDate 2009
url http://repository.urosario.edu.co/handle/10336/2416
_version_ 1645140746490085376
score 11,151152