Demographic Factors and Price Distortions in Insurance
Risk Management and Insurance Review, Forthcoming
42 Pages Posted: 21 Oct 2010 Last revised: 26 Feb 2014
Date Written: October 19, 2010
Few papers have analyzed the potential linkages between price distortions and the specific demographic and political traits of customers. The existence of price distortions may have adverse and potentially unintended impacts on certain demographic groups, leading to significant public policy concerns. The current study uses census tract data and rating factors to examine age, income, and race demographics in an effort to determine if any subgroups of the population are adversely impacted by the price distortions of property insurance. The results suggest that Hispanics, lower-income households, and specific age groups pay relatively more for insurance coverage than comparison groups.
Keywords: mispricing, property insurance, demographics, spatial-autocorrelation
JEL Classification: J10, J18, G28
Suggested Citation: Suggested Citation