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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

  • Jaap Abbring

    ()
    (VU University Amsterdam)

  • Pierre-André Chiappori

    ()
    (Columbia University)

  • Tibor Zavadil

    ()
    (VU University Amsterdam)

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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File URL: http://papers.tinbergen.nl/08075.pdf
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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-075/3.

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Date of creation: 25 Aug 2008
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Handle: RePEc:dgr:uvatin:20080075

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Web page: http://www.tinbergen.nl

Related research

Keywords: insurance; moral hazard; selection; state dependence; event-history analysis;

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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.
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Cited by:
  1. Georges Dionnne & Pierre-Carl Michaud & Jean Pinquet, 2012. "A Review of Recent Theoretical and Empirical Analyses of Asymmetric Information in Road Safety and Automobile Insurance," Cahiers de recherche 1204, CIRPEE.
  2. Arthur Lewbel & Xun Lu & Liangjun Su, 2012. "Specification Testing for Transformation Models with an Application to Generalized Accelerated Failure-time Models," Boston College Working Papers in Economics 817, Boston College Department of Economics, revised 01 May 2013.
  3. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
  4. Spenkch, Jörg L., 2011. "Adverse selection and moral hazard among the poor: evidence from a randomized experiment," MPRA Paper 31443, University Library of Munich, Germany.

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