Abstract

http://ssrn.com/abstract=289966
 
 

References (36)



 
 

Citations (31)



 


 



Asymmetric Information and Learning: Evidence from the Automobile Insurance Market


Alma Cohen


Tel Aviv University - Eitan Berglas School of Economics; Harvard Law School; National Bureau of Economic Research (NBER)


The Review of Economics and Statistics, Vol. 87, pp. 197-207, 2005

Abstract:     
This paper tests the predictions of adverse selection models using data from the automobile insurance market. I find that, in contrast to what recent research has suggested, the evidence is consistent with the presence of informational asymmetries in this market: new customers choosing higher insurance coverage are associated with more accidents. Consistent with the presence of learning by policyholders about their risk type, such a coverage-accident correlation exists only for policyholders with three or more years of driving experience prior to joining their insurer. The informational advantage that new customers with driving experience have over the insurer appears to arise in part from under-reporting of past claim history. I find evidence that policyholders switching to new insurers are disproportionately ones with a poor claims history and that new customers under-report their past claims history when joining a new insurer.

Number of Pages in PDF File: 30

Keywords: Asymmetric information, adverse selection, screening, sorting, moral hazard, insurance, deductible, learning, information transmission, repeat customers

JEL Classification: D40, D80, D82, D83, L10, G22

Accepted Paper Series


Download This Paper

Date posted: April 2, 2003  

Suggested Citation

Cohen, Alma, Asymmetric Information and Learning: Evidence from the Automobile Insurance Market. The Review of Economics and Statistics, Vol. 87, pp. 197-207, 2005. Available at SSRN: http://ssrn.com/abstract=289966 or http://dx.doi.org/10.2139/ssrn.289966

Contact Information

Alma Cohen (Contact Author)
Tel Aviv University - Eitan Berglas School of Economics ( email )
Ramat Aviv, Tel Aviv, 69978
Israel
Harvard Law School ( email )
Cambridge, MA 02138
United States
(617) 496-4099 (Phone)
(617) 812-0554 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,467
Downloads: 915
Download Rank: 12,201
References:  36
Citations:  31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.422 seconds