The importance of the choice of test for finding evidence of asymmetric information

Catherine Donnelly, Martin Englund, Jens Perch Nielsen

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
31 Downloads (Pure)

Abstract

We put one of the predictions of adverse-selection models to the test, using data from the Danish automobile insurance market: that there is a positive correlation between claims risk and insurance coverage. We can find a statistically significant insurance coverage–risk correlation when coverage is expressed relative to the insurance premium, but not when it is expressed in monetary terms.
Original languageEnglish
Pages (from-to)173-195
Number of pages23
JournalASTIN Bulletin: The Journal of the IAA
Volume44
Issue number2
Early online date16 Jan 2014
DOIs
Publication statusPublished - 2014

Keywords

  • Adverse selection
  • moral hazard
  • automobile insurance
  • learning
  • bivariate probit

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