Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance
Traditional insurance contracts do not offer protection against the replacement value of a vehicle. A replacement cost endorsement gives the opportunity to get a new vehicle in the case of a total theft or in the case of total destruction of the car in a road accident. This type of protection was introduced in Canada in the late 1980's. It is also offered in France and many insurers in the United States are going to move in that direction. We propose tests that separate moral hazard from adverse selection in the analysis of the effect of this additional protection on car theft. We show that holders of car insurance policies with a replacement cost endorsement have a higher probability of theft near the end of this additional protection (usually 24 months following the acquisition of a new car). Our tests indicate that this result is a form of ex post moral hazard or opportunistic insurance fraud. Copyright 2002 by Kluwer Academic Publishers
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. Dionne & D. Gouriéroux & C. Vanasse, 1998.
"The informational content of household decisions with applications to insurance under adverse selection,"
THEMA Working Papers
98-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Dionne, G. & Gourieroux, C. & Vanasse, C., 1998. "The Informational Content of Household Decisions with Applications to Insurance under Adverse Selection," Papers 9806, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- Bernard Fortin & Paul Lanoie, 1998.
"Effects of Workers' Compensation: A Survey,"
CIRANO Working Papers
- Georges Dionne & Christian Gourieroux & Charles Vanasse, 2001. "Testing for Evidence of Adverse Selection in the Automobile Insurance Market: A Comment," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 444-473, April.
- Dionne, Georges & St-Michel, Pierre, 1991.
"Workers' Compensation and Moral Hazard,"
The Review of Economics and Statistics,
MIT Press, vol. 73(2), pages 236-44, May.
- Dionne, G. & St-Michel, P., 1988. "Workers' Compensation and Moral Hazard," Cahiers de recherche 8831, Universite de Montreal, Departement de sciences economiques.
- Dionne, G. & St-Michel, P., 1988. "Workers' Compensation And Moral Hazard," Cahiers de recherche 8831, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Newhouse, Joseph P, 1987. "Health Economics and Econometrics," American Economic Review, American Economic Association, vol. 77(2), pages 269-74, May.
- Bond, E.W. & Crocker, K.J., 1993.
"Hardball and the Soft Touch: The Economics of Optimal Insurance Contracts with Costly State Verification and Endogenous Monitoring Costs,"
10-93-1b, Pennsylvania State - Department of Economics.
- Bond, Eric W. & Crocker, Keith J., 1997. "Hardball and the soft touch: The economics of optimal insurance contracts with costly state verification and endogenous monitoring costs," Journal of Public Economics, Elsevier, vol. 63(2), pages 239-264, January.
- G. Dionne, 1998.
"La mesure empirique des problèmes d'information,"
THEMA Working Papers
98-33, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Keith J. Crocker & John Morgan, 1998. "Is Honesty the Best Policy? Curtailing Insurance Fraud through Optimal Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 355-375, April.
- Marcel Boyer & Georges Dionne, 1987. "Description and Analysis of the Quebec Automobile Insurance Plan," Canadian Public Policy, University of Toronto Press, vol. 13(2), pages 181-195, June.
- P. Picard, 1996.
"On the Design of Optimal Insurance Policies under Manipulation of Audit Cost,"
THEMA Working Papers
96-20, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Picard, Pierre, 2000. "On the Design of Optimal Insurance Policies under Manipulation of Audit Cost," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 1049-71, November.
- Picard, Pierre, 1996. "On the design of optimal insurance policies under manipulation of audit cost," CEPREMAP Working Papers (Couverture Orange) 9605, CEPREMAP.
- Picard, P., 1996. "On the design of Optimal Insurance Policies Under Manipulation of Audit Cost," Papers 9620, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- Caron, L. & Dionne, G., 1996.
"Insurance Fraud Estimation: More Evidence from the Quebec Automobile Insurance Industry,"
Ecole des Hautes Etudes Commerciales de Montreal-
96-02, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
- L. Caron & G. Dionne, 1997. "Insurance fraud estimation : more evidence from the Quebec automobile insurance industry," THEMA Working Papers 97-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Pierre Picard, 2012. "Economic Analysis of Insurance Fraud," Working Papers hal-00725561, HAL.
- P. Picard, 1998. "Insurance fraud : theory," THEMA Working Papers 98-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Auriol, Emmanuelle & Picard, Pierre M., 1999. "Optimal Industrial Policy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Butler, Richard J & Durbin, David L & Helvacian, Nurhan M, 1996. "Increasing Claims for Soft Tissue Injuries in Workers' Compensation: Cost Shifting and Moral Hazard," Journal of Risk and Uncertainty, Springer, vol. 13(1), pages 73-87, July.
- Cummins, J David & Tennyson, Sharon, 1996. "Moral Hazard in Insurance Claiming: Evidence from Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 29-50, January.
- Pierre-André Chiappori & Bernard Salanié, 1997.
"Testing for Asymmetric Information in Insurance Markets,"
97-11, Centre de Recherche en Economie et Statistique.
- Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
- Puelz, Robert & Snow, Arthur, 1994. "Evidence on Adverse Selection: Equilibrium Signaling and Cross-Subsidization in the Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 236-57, April.
- Boyer, M Martin, 2000. " Insurance Taxation and Insurance Fraud," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(1), pages 101-34.
- Devlin, R.A., 1988. "Liability Versus No-Fault Automobile Insurance Regimes: An Analysis Of The Experience In Quebec," Working Papers 88126, Wilfrid Laurier University, Department of Economics.
- Fortin, Bernard & Lanoie, Paul, 1992. "Substitution between unemployment insurance and workers' compensation : An analysis applied to the risk of workplace accidents," Journal of Public Economics, Elsevier, vol. 49(3), pages 287-312, December.
- Picard, Pierre, 1996. "Auditing claims in the insurance market with fraud: The credibility issue," Journal of Public Economics, Elsevier, vol. 63(1), pages 27-56, December.
When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:24:y:2002:i:3:p:213-30. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.