Asymmetric information, self-selection and pricing of insurance contracts: the simple no-claims case

Catherine Donnelly, Martin Englund, Jens Perch Nielsen, Carsten Tanggaard

Research output: Contribution to journalArticle

4 Citations (Scopus)
65 Downloads (Pure)

Abstract

This article presents an optional bonus-malus contract based on a priori risk classification of the underlying insurance contract. By inducing self-selection, the purchase of the bonus-malus contract can be used as a screening device. This gives an even better pricing performance than both an experience rating scheme and a classical no-claims bonus system. An application to the Danish automobile insurance market is considered.
Original languageEnglish
Pages (from-to)757-780
Number of pages24
JournalJournal of Risk and Insurance
Volume81
Issue number4
Early online date20 Jun 2013
DOIs
Publication statusPublished - Dec 2014

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