Do the Better Insured Cause More Damage? Testing for Asymmetric Information in Car Insurance
26 Pages Posted: 19 Jan 2016
Date Written: December 2015
This article tests for the presence of asymmetric information in Dutch car insurance among senior drivers using several nonparametric tests based on conditional‐correlation approach. Since asymmetric information implies that more comprehensive coverage is associated with higher risk, we examine whether the better insured have a higher frequency of claims or cause more severe accidents. Using data on claim occurrences, incurred losses and written premiums, and controlling for the insureds’ experience rating, we do not find any evidence of asymmetric information in this market.
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