THE IMPORTANCE OF THE CHOICE OF TEST FOR FINDING EVIDENCE OF ASYMMETRIC INFORMATION

Catherine Donnelly, Martin Englund and Jens Perch Nielsen

ASTIN Bulletin, 2014, vol. 44, issue 2, 173-195

Abstract: We put one of the predictions of adverse-selection models to the test, using data from the Danish automobile insurance market: that there is a positive correlation between claims risk and insurance coverage. We can find a statistically significant insurance coverage--risk correlation when coverage is expressed relative to the insurance premium, but not when it is expressed in monetary terms.

Date: 2014
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