Testing Advantageous Selection by Hidden Action: Evidence from Automobile Liability Insurance

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Title:	Testing Advantageous Selection by Hidden Action: Evidence from Automobile Liability Insurance
Authors:	黃瑞卿;Huang, Rachel J.;曾郁仁;Tzeng, Larry Y.;汪琪玲;Wang, Kili C.
Contributors:	淡江大學保險學系
Keywords:	asymmetric information, advantageous selection, hidden action,automobile liability insurance.
Date:	2008-12
Issue Date:	2011-10-23 11:56:55 (UTC+8)
Abstract:	This paper examines advantageous selection in automobile liability insurance from the approach with hidden action, which argues that the individual’s private information on his own characteristics will affect his decision on the investment on precautionary effort (hidden action) to reduce the loss probability and further results in a negative relationship between coverage and loss probability in equilibrium. We argue that individual’s vehicle maintenance record could be a proper proxy for the precautionary effort. By combining insurance data from an insurance company and maintenance data from the largest car manufacturer in Taiwan, we demonstrate advantageous selection in automobile liability insurance in Taiwan.
Relation:	台灣風險與保險學會第二屆年會暨國際學術研討會
Appears in Collections:	[Graduate Institute & Department of Insurance Insurance] Proceeding

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