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Adverse selection and moral hazard in corporate insurance markets: Evidence from the 2011 Thailand floods

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  • Adachi, Daisuke
  • Nakata, Hiroyuki
  • Sawada, Yasuyuki
  • Sekiguchi, Kunio

Abstract

This paper is the first empirical study on adverse selection and moral hazard in the corporate disaster insurance market. By constructing and examining a unique plant-level panel dataset on the 2011 Thailand floods, we overcome the general lack of data that has previously prevented a systematic study on the issue. By exploiting unexpected, large losses caused by a severe disaster, we find evidence of adverse selection for both property and business interruption insurance. Moral hazard, measured by impacts on recovery efforts, is also found for both types of insurance, albeit more salient effects for business interruption insurance.

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  • Adachi, Daisuke & Nakata, Hiroyuki & Sawada, Yasuyuki & Sekiguchi, Kunio, 2023. "Adverse selection and moral hazard in corporate insurance markets: Evidence from the 2011 Thailand floods," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 376-386.
    • Handle: RePEc:eee:jeborg:v:205:y:2023:i:c:p:376-386
    DOI: 10.1016/j.jebo.2022.11.027
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    Cited by:

    1. ADACHI Daisuke & SAITO Yukiko, 2020. "Multinational Production and Labor Share," Discussion papers 20012, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Adverse selection; Business interruption insurance; Moral hazard; Property insurance;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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