Multiple Dimensions of Private Information in Life Insurance Markets
AbstractConventional theory for private information of adverse selection predicts a positive correlation between insurance coverage and ex post risk. This paper shows the opposite in the life insurance market despite the clear evidence of private information on mortality risk. The reason for this contradictory result is the existence of multiple dimensions of private information. The paper discusses how the private information on insurance preference offsets the effect of the private information on mortality risk. A mixture density model is applied to disentangle these two effects.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19629.
Date of creation: Nov 2013
Date of revision:
Note: AG HE
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Find related papers by 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
- I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-CTA-2013-11-22 (Contract Theory & Applications)
- NEP-IAS-2013-11-22 (Insurance Economics)
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