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Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance Data

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Author Info
Abbring, J.H.
Chiappori, P.A.
Zavadil, T. (Tilburg University, Center for Economic Research)

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Abstract

This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme, and their effects on claim times and sizes under moral hazard. We develop tests that exploit these structural implications of moral hazard and experience rating. Unlike much of the earlier literature, we find evidence of moral hazard.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-77.

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Date of creation: 2008
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Handle: RePEc:dgr:kubcen:200877

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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  1. Jaap H. Abbring & James J. Heckman & Pierre-André Chiappori & Jean Pinquet, 2003. "Adverse Selection and Moral Hazard In Insurance: Can Dynamic Data Help to Distinguish?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 512-521, 04/05. [Downloadable!] (restricted)
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