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Expiration Dates in Automobile Insurance Contracts: The Curious Case of Last Policy Month Claims in Taiwan

Author

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  • Chu-Shiu Li

    (Department of International Business, Asia University, No. 500, Lioufeng Rd., Wufeng, Taichung, 41354, Taiwan.
    Risk and Insurance Research Center, National Cheng-Chi University, No. 64, Sec.2, Chinan Rd., Taipei, 11605, Taiwan.)

  • Chwen-Chi Liu

    (Risk and Insurance Research Center, National Cheng-Chi University, No. 64, Sec.2, Chinan Rd., Taipei, 11605, Taiwan.
    Department of Risk Management and Insurance, Feng Chia University, No. 100, Wenhwa Rd., Seatwen, Taichung, 40724, Taiwan.)

  • Sheng-Chang Peng

    (Department of Risk Management and Insurance, Feng Chia University, No. 100, Wenhwa Rd., Seatwen, Taichung, 40724, Taiwan.)

Abstract

This paper investigates a widespread trend in the Taiwanese automobile insurance market in which the loss claims of vehicle damage insurance contracts have a high propensity to occur just before the end of the policy year (as opposed to calendar year). We show that certain uncommon characteristics of claim data are consistently observed in the last policy month. We indirectly show that there is a severe time-varying excess claim problem in this market. The major sources of excess claims can be explained by the bonus-malus system problem and the auto-dealer incentive issue.

Suggested Citation

  • Chu-Shiu Li & Chwen-Chi Liu & Sheng-Chang Peng, 2013. "Expiration Dates in Automobile Insurance Contracts: The Curious Case of Last Policy Month Claims in Taiwan," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 38(1), pages 23-47, March.
    • Handle: RePEc:pal:genrir:v:38:y:2013:i:1:p:23-47
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    References listed on IDEAS

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    Cited by:

    1. Wei‐Jin Wu & Chu‐Shiu Li & Sheng‐Chang Peng, 2020. "The relationships between vehicle characteristics and automobile accidents," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 23(4), pages 331-377, December.
    2. Pierre Picard & Jennifer Wang & Kili Wang, 2019. "Collusion between Retailers and Customers: The Case of Insurance Fraud in Taiwan," Working Papers hal-02045335, HAL.
    3. Peng, Sheng-Chang & Li, Chu-Shiu, 2024. "Bundled insurance coverage and asymmetric information: Claim patterns of automobile theft insurance in Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    4. Pierre Picard & Kili Wang, 2015. "INSURANCE FRAUD THROUGH COLLUSION BETWEEN POLICYHOLDERS AND CAR DEALERS: THEORY AND EMPIRICAL EVIDENCE Pierre PICARD," Working Papers hal-01140590, HAL.
    5. Chun-Ting Liu & Jui-Yun Wu & Chi-Hung Chang, 2020. "Switching motivation and moral hazard: evidence from automobile physical damage insurance in Taiwan," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(2), pages 361-391, April.

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