Moral hazard, insurance claims, and repeated insurance contracts

Chris Robinson and Bingyong Zheng

Canadian Journal of Economics, 2010, vol. 43, issue 3, 967-993

Abstract: The paper develops a simple model of repeated automobile insurance contracts, providing a framework for analyzing changes in aggregate insurance data in periods of changes that affect driver incentives. Experience rating of premiums gives drivers an incentive to exert effort to avoid accidents (ex ante moral hazard), and an incentive to hide accidents (ex post moral hazard). The empirical analysis, using data from the competitive insurance markets in Ontario and Alberta over a period of major legislative changes in Ontario, suggests that much of the recent decline in accidents in Ontario was due to an increased incentive to hide accidents.

JEL-codes: D12 D82 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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