A Study on the Asymmetric Information Problems of the Automobile Insurance Market in Taiwan
Date Issued
2009
Date
2009
Author(s)
Chen, Li-Chen
Abstract
This study extends Chiappori and Salanie’s (2000) methodology to analyze asymmetric information problems in Taiwan’s automobile comprehensive insurance market. By conditional correlation analysis, we could find evidence to support the existence of asymmetric information problems and classify the effects of moral hazard and adverse selection by using information on timing and numbers of claims in a unique data set.fter we control the effect of car age, the empirical findings support the evidence of asymmetric information, and the pattern of positive conditional correlation also shows that both moral hazard and adverse selection would affect the pattern of claims. Meanwhile, our results are robust to the car age. n addition, the subsamples which have car age between one and three years get weaker asymmetric information when the claim amount increases, and those which have car age under one year get stronger one after controlling the effect of claim amount. This result implies that insurance companies may have different standards or procedures of audit for cases of different claim amount. And the conditional correlation of subsample which has car age under one year would increase four or five months earlier than that of subsamples which have car age between one and three years, which implies that the owners of new cars have little tolerance about claims and would not prefer to accumulate the claims to the last two months.
Subjects
Automobile Insurance
Asymmetric Information
Adverse Selection
Moral Hazard
Type
thesis
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