Moral Hazard and Dynamic Insurance Data
AbstractThis paper exhibits dynamic features of insurance contracts in the empirical analysis of moral hazard. We first show that experience rating implies negative occurrence dependence under moral hazard: individual claim intensities decrease with the number of past claims. We then show that dynamic insurance data allow to distinguish this moral-hazard effect from dynamic selection on unobservables. We develop nonparametric tests and estimate a flexible parametric model. We find no evidence of moral hazard in French car insurance. Our analysis contributes to a recent literature based on static data that has problems distinguishing between moral hazard and selection and dealing with dynamic features of actual insurance contracts. Methodologically, this paper builds on and extends the literature on state dependence and heterogeneity in event-history data. (JEL: D82, G22, C41, C14
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 316.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Insurance; moral hazard; empirical test of contract theory;
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
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