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Moral Hazard and Dynamic Insurance Data

Author

Listed:
  • Jaap H. Abbring

    (Free University Amsterdam)

  • Pierre-André Chiappori

    (University of Chicago)

  • Jean Pinquet

    (Université Paris X-Nanterre)

Abstract

This paper exploits dynamic features of insurance contracts in the empirical analysis of moral hazard. We first show that experience rating implies negative occurrence dependence under moral hazard: individual claim intensities decrease with the number of past claims. We then show that dynamic insurance data allow to distinguish this moral-hazard effect from dynamic selection on unobservables. We develop nonparametric tests and estimate a flexible paramet-ric model. We find no evidence of moral hazard in French car insurance. Our analysis contributes to a recent literature based on static data that has problems distinguishing between moral hazard and selection and dealing with dynamic features of actual insurance contracts. Methodologically, this paper builds on and extends the literature on state dependence and heterogeneity in event-history data. (JEL: D82, G22, C41, C14) Copyright (c) 2003 The European Economic Association.

Suggested Citation

  • Jaap H. Abbring & Pierre-André Chiappori & Jean Pinquet, 2003. "Moral Hazard and Dynamic Insurance Data," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 767-820, June.
    • Handle: RePEc:tpr:jeurec:v:1:y:2003:i:4:p:767-820
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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