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Asymmetric Information in Automobile Insurance: Evidence From Driving Behavior

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  • Alois Geyer
  • Daniela Kremslehner
  • Alexander Muermann

Abstract

Based on a unique data set of driving behavior we test whether private information in driving characteristics has significant effects on contract choice and risk in automobile insurance. We define a driving factor based on overall distance driven, number of car rides, and speeding. Using local weather conditions, we account for the endogeneity of the driving factor. While this driving factor has an effect on risk, there is no significant evidence for selection effects in the level of third‐party liability and first‐party insurance coverage.

Suggested Citation

  • Alois Geyer & Daniela Kremslehner & Alexander Muermann, 2020. "Asymmetric Information in Automobile Insurance: Evidence From Driving Behavior," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 969-995, December.
    • Handle: RePEc:bla:jrinsu:v:87:y:2020:i:4:p:969-995
    DOI: 10.1111/jori.12279
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    4. Martin Eling & Irina Gemmo & Danjela Guxha & Hato Schmeiser, 2024. "Big data, risk classification, and privacy in insurance markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(1), pages 75-126, March.
    5. Chao Ma, 2021. "Be Cautious In The Last Month: The Sunk Cost Fallacy Held By Car Insurance Policyholders," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1199-1236, August.

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