Digitalisation and cream skimming adverse selection in the property-casualty insurance industry: evidence from China

Feiyan Yang, Jiahui Ren and Changyuan Xia ()
Additional contact information
Feiyan Yang: Southwestern University of Finance and Economics
Jiahui Ren: Southwestern University of Finance and Economics
Changyuan Xia: Southwestern University of Finance and Economics

The Geneva Papers on Risk and Insurance - Issues and Practice, 2025, vol. 50, issue 2, No 2, 302-334

Abstract: Abstract This study examines the potential of digitalisation to mitigate insurers’ vulnerability to cream skimming adverse selection and explores the mechanism underlying this effect. Employing unbalanced panel data of 84 property-casualty insurance companies in China from 2010 to 2020, our investigation reveals that digitalisation reduces insurers’ susceptibility to cream skimming adverse selection, especially among firms located in areas with lower levels of social trust. Digitalised insurers are able to collect a wider variety of customer information, make pricing more effective and therefore achieve lower loss ratios in contrast to their less digitalised rivals. Moreover, we discern a more pronounced impact of digitalisation on companies during their growth stages as compared to their well-established counterparts. Our findings remain robust when subjected to various endogeneity and robustness tests.

Keywords: Digitalisation; Cream skimming adverse selection; Property-casualty insurance; Loss ratios (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41288-023-00310-z Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:gpprii:v:50:y:2025:i:2:d:10.1057_s41288-023-00310-z

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

DOI: 10.1057/s41288-023-00310-z

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().