Is the Market Classification of Risk Always Efficient? - Evidence from German Third Party Motor Insurance
The efficiency of market-determined risk classification in automobile insurance is a lasting matter of controversy. It can be traced back to the 1950s (Muir, 1957) and received broad economic attention in the 1980s when spiralling car insurance premiums in the US were blamed on tariff regulations prohibiting the use of sex, age and location as risk characteristics (Blackmon/ Zeckhauser 1991, Cummins/ Tennyson 1992, Harrington/ Doerpinghaus 1993). In a mirroring move the EU saw a heated political and legal debate on the use of special tariffs for foreigners, in the 1980s, which resulted in a legal ban of ‘discriminatory’ tariffs for mandatory insurance schemes in many European countries. The latest blow against risk classification in car insurance comes with the EU Employment and Social Affairs’ draft directive on gender equality which proposes to prohibit gender specific calculation of all private insurance products, including non-mandatory branches such as life, private health or comprehensive car insurance.
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- Lückgen, Ingo & Oberschachtsiek, Dirk & Sternberg, Rolf & Wagner, Joachim, 2004. "Nascent Entrepreneurs in German Regions: Evidence from the Regional Entrepreneurship Monitor (REM)," IZA Discussion Papers 1394, Institute for the Study of Labor (IZA).
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- Joachim Wagner, 2005.
"Nascent and Infant Entrepreneurs in Germany. Evidence from the Regional Entrepreneurship Monitor (REM),"
Working Paper Series in Economics
1, University of Lüneburg, Institute of Economics.
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- Luigi Buzzacchi & Tommaso M. Valletti, 2005. "Strategic Price Discrimination in Compulsory Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(1), pages 71-97, June.
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- Bond, Eric W & Crocker, Keith J, 1991. "Smoking, Skydiving, and Knitting: The Endogenous Categorization of Risks in Insurance Markets with Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 177-200, February.
- Michael Hoy, 1982. "Categorizing Risks in the Insurance Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 321-336.
- Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500. Full references (including those not matched with items on IDEAS)
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