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Separating Moral Hazard from Adverse Selection and Learning in Automobile Insurance: Longitudinal Evidence from France

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  • Georges Dionne
  • Pierre-Carl Michaud
  • Maki Dahchour

Abstract

The identification of information problems in different markets is a challenging issue in the economic literature. In this paper, we study the identification of moral hazard from adverse selection and learning within the context of a multi-period dynamic model. We extend the model of Abbring et al. (2003) to include learning and insurance coverage choice over time. We derive testable empirical implications for panel data. We then perform tests using longitudinal data from France during the period 1995-1997. We find evidence of moral hazard among a sub-group of policyholders with less driving experience (less than 15 years). Policyholders with less than 5 years of experience have a combination of learning and moral hazard, whereas no residual information problem is found for policyholders with more than 15 years of experience.

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Bibliographic Info

Paper provided by CIRPEE in its series Cahiers de recherche with number 1035.

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Date of creation: 2010
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Handle: RePEc:lvl:lacicr:1035

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Keywords: Moral hazard; adverse selection; learning; dynamic insurance contracting; panel data; empirical test;

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Cited by:
  1. Balafoutas, Loukas & Kerschbamer, Rudolf & Sutter, Matthias, 2013. "Second-Degree Moral Hazard in a Real-World Credence Goods Market," IZA Discussion Papers 7714, Institute for the Study of Labor (IZA).
  2. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
  3. 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.
  4. Shi, Peng & Valdez, Emiliano A., 2011. "A copula approach to test asymmetric information with applications to predictive modeling," Insurance: Mathematics and Economics, Elsevier, vol. 49(2), pages 226-239, September.
  5. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.

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