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Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance

Author

Listed:
  • Tibor Zavadil

    (VU University Amsterdam and Tinbergen Institute)

  • Pierre-Andre Chiappori

    (Columbia University)

  • Jaap H. Abbring

    (VU University Amsterdam and Tinbergen Institute)

Abstract

This paper analyzes ex ante and ex post moral hazard in car insurance using Dutch longitudinal micro data. We specify a dynamic model of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices. We use this model to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme. We then develop semi-parametric methods that exploit these predictions and data on claim times and sizes to test for moral hazard. We find some evidence of moral hazard.

Suggested Citation

  • Tibor Zavadil & Pierre-Andre Chiappori & Jaap H. Abbring, 2007. "Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance," 2007 Meeting Papers 869, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:869
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    Cited by:

    1. Ciprian MatiÅŸ & Eugenia MatiÅŸ, 2013. "Asymmetric Information In Insurance Field: Some General Considerations," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 1-17.
    2. Lewbel, Arthur & Lu, Xun & Su, Liangjun, 2015. "Specification testing for transformation models with an application to generalized accelerated failure-time models," Journal of Econometrics, Elsevier, vol. 184(1), pages 81-96.
    3. Elena Krasnokutskaya & Przemyslaw Jeziorski, 2016. "Adverse Selection and Moral Hazard in the Dynamic Model of Auto Insurance," 2016 Meeting Papers 1514, Society for Economic Dynamics.
    4. Maria Forlicz & Stefan Forlicz, 2022. "The Impact of Introducing Co-insurance into an Insurance Policy on Moral Hazard: An Incentivised Experiment," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 783-808.
    5. Sjur Didrik Flåm & Elmar G. Wolfstetter, 2015. "Liability Insurance and Choice of Cars: A Large Game Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 943-963, December.
    6. Michael Ludkovski & Virginia R. Young, 2010. "Ex Post Moral Hazard and Bayesian Learning in Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(4), pages 829-856, December.

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