Testing for Adverse Selection in China's Auto Insurance Market

Feng Gao and Jun Wang
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Feng Gao: Tsinghua University
Jun Wang: Tsinghua University

Asia-Pacific Journal of Risk and Insurance, 2011, vol. 5, issue 1, pages 5

Abstract:

This paper empirically examines the adverse selection models by using the data from China’s personal automobile insurance market through the standard positive-correlation test. Results show that higher-risk insurance policyholders do tend to buy insurance with a lower coinsurance rate, which supports the existence of adverse selection in China's automobile insurance market. This is quite a contrast to the findings in mature insurance markets.

Keywords: adverse selection; ordered logit model; negative binominal model (search for similar items in EconPapers)
Date: 2011
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