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Moral hazard, insurance claims, and repeated insurance contracts

Author

Listed:
  • Chris Robinson
  • Bingyong Zheng

Abstract

The paper develops a simple model of repeated automobile insurance contracts, providing a framework for analyzing changes in aggregate insurance data in periods of changes that affect driver incentives. Experience rating of premiums gives drivers an incentive to exert effort to avoid accidents (ex ante moral hazard), and an incentive to hide accidents (ex post moral hazard). The empirical analysis, using data from the competitive insurance markets in Ontario and Alberta over a period of major legislative changes in Ontario, suggests that much of the recent decline in accidents in Ontario was due to an increased incentive to hide accidents.

Suggested Citation

  • Chris Robinson & Bingyong Zheng, 2010. "Moral hazard, insurance claims, and repeated insurance contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 967-993, August.
  • Handle: RePEc:cje:issued:v:43:y:2010:i:3:p:967-993
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    Citations

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    Cited by:

    1. Sabau-Popa Claudia Diana & Bradea Ioana & Bolos Marcel Ioan & Delcea Camelia, 2015. "The Information Confidentiality And Cyber Security In Medical Institutions," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 855-864, July.
    2. Dionne, Georges & Liu, Ying, 2017. "Effects of Insurance Incentives on Road Safety: Evidence from a Natural Experiment in China," Working Papers 17-1, HEC Montreal, Canada Research Chair in Risk Management.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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