Demographic Factors and Price Distortions in Insurance

Risk Management and Insurance Review, Forthcoming

42 Pages Posted: 21 Oct 2010 Last revised: 26 Feb 2014

Ron Cheung

Oberlin College

Cassandra R. Cole

Florida State University - College of Business

David A. MacPherson

Trinity University; IZA Institute of Labor Economics

Kathleen A. McCullough

Florida State University - College of Business

Charles Nyce

Florida State University

Multiple version iconThere are 2 versions of this paper

Date Written: October 19, 2010

Abstract

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

Cheung, Ron and Cole, Cassandra R. and MacPherson, David A. and McCullough, Kathleen A. and Nyce, Charles, Demographic Factors and Price Distortions in Insurance (October 19, 2010). Risk Management and Insurance Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1694864 or http://dx.doi.org/10.2139/ssrn.1694864

Ron Cheung

Oberlin College ( email )

Oberlin, OH 44074
United States
440-775-8971 (Phone)
440-775-6978 (Fax)

HOME PAGE: http://www.oberlin.edu/faculty/rcheung/

Cassandra R. Cole

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

David A. MacPherson

Trinity University ( email )

San Antonio, TX 78212
United States
210-999-8112 (Phone)
210-999-7255 (Fax)

HOME PAGE: http://www.davemacpherson.com

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Kathleen A. McCullough (Contact Author)

Florida State University - College of Business ( email )

Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)

Charles Nyce

Florida State University ( email )

821 Academic Way
349 RBB, College of Business
Tallahassee, FL 32306
United States
850-645-8392 (Phone)

Paper statistics

Downloads
107
Rank
203,956
Abstract Views
1,162