Price Cutting in Liability Insurance Markets
This article analyzes alleged underpricing of general liability insurance prior to the mid-1980s liability insurance crisis. The theoretical analysis considers whether moral hazard and/or heterogeneous information for forecasting claim costs can cause some firms to price too low and depress other firms' prices. Cross-sectional analysis of insurer loss forecast revisions (which should be greater for firms with low prices caused by moral hazard or heterogeneous information) and premium growth provides evidence consistent with low pricing due to moral hazard but not heterogeneous information. The evidence also implies that shifts in the loss distribution produced large industrywide forecast errors. Copyright 1994 by University of Chicago Press.
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.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:67:y:1994:i:4:p:511-38. 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: (Journals Division)
If references are entirely missing, you can add them using this form.