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

J.H. Abbring, P.A. Chiappori, T. Zavadil

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Abstract

This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme, and their effects on claim times and sizes under moral hazard. We develop tests that exploit these structural implications of moral hazard and experience rating. Unlike much of the earlier literature, we find evidence of moral hazard.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages72
Volume2008-77
Publication statusPublished - 2008

Publication series

NameCentER Discussion Paper
Volume2008-77

Keywords

  • insurance
  • moral hazard
  • selection
  • state dependence
  • event-history analysis

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