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Credit Crunch and Insurance Consumption: The Aftermath of the Subprime Mortgage Crisis

43 Pages Posted: 10 Feb 2015  

Shinichi Kamiya

Nanyang Technological University (NTU) - Nanyang Business School

Date Written: February 4, 2015

Abstract

Using cross-state panel auto insurance premium data from 2007 to 2012 in the U.S., this study provides evidence that individual purchases of private auto insurance were excessively reduced during and after the U.S. subprime mortgage. Analyses show that the credit crunch triggered by a shock in house prices was a major contributing factor of the reduced consumption of auto insurance during and after the crisis. This result is robust even after controlling for associated factors such as insurance prices, personal spending on vehicles and general consumption, recession indicators and the use of alternative transportation. Tests also find that a drop in house prices was also related to the deterioration of underwriting performance. These findings provide evidence for a real effect of the banking crisis.

Keywords: Banking crisis, credit, auto loan, insurance

JEL Classification: G21, G22, E51

Suggested Citation

Kamiya, Shinichi, Credit Crunch and Insurance Consumption: The Aftermath of the Subprime Mortgage Crisis (February 4, 2015). Available at SSRN: https://ssrn.com/abstract=2560647 or http://dx.doi.org/10.2139/ssrn.2560647

Shinichi Kamiya (Contact Author)

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Singapore, 639798
Singapore

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