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An Empirical Investigation of Asymmetric Information in China’s Automobile Insurance Market

Author

Listed:
  • Bo Qu

    (National Internet Finance Association of China
    The People’s Bank of China)

  • Li Wei

    (Renmin University of China
    China Financial Policy Research Center)

  • Ping Wei

    (China Life Property & Casualty Insurance Company Limited
    Renmin University of China)

Abstract

In this paper, we investigate the asymmetric information in China’s automobile insurance market and propose a set of risk classification approaches to alleviate it. Using a unique data set of automobile insurance coverage in China from 2011 to 2013, we discover that policyholders who purchase more insurance coverage are riskier, which indicates the presence of information asymmetry in China’s automobile insurance market. Controlling the attributes of the automobiles does not affect the main results. Moreover, based on data mining technology, we find that the risk classification approach is able to mitigate the problem of asymmetric information in China’s automobile insurance market to some extent with little additional cost.

Suggested Citation

  • Bo Qu & Li Wei & Ping Wei, 2018. "An Empirical Investigation of Asymmetric Information in China’s Automobile Insurance Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(3), pages 520-538, July.
    • Handle: RePEc:pal:gpprii:v:43:y:2018:i:3:d:10.1057_s41288-018-0087-2
    DOI: 10.1057/s41288-018-0087-2
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    References listed on IDEAS

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    Cited by:

    1. Peng, Sheng-Chang & Li, Chu-Shiu, 2024. "Bundled insurance coverage and asymmetric information: Claim patterns of automobile theft insurance in Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).

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