Antecedents of hidden action problems in the Egyptian automobile insurance market: buyer-supplier relationship perspective

Eslam Thabet, Nazaré Rego and Arnt Buvik

International Journal of Procurement Management, 2024, vol. 20, issue 3, 302-330

Abstract: This paper explores the impact of asymmetric information in an exchange relationship involving pre-screening by insurers, trust, and self-protection provided by different kinds of contracts on hidden action problems in the Egyptian automobile insurance market from two major theoretical perspectives: principle-agent theory and relational-contracting theory. Survey data on 63 relationships between insurers and business policyholders were analysed, demonstrating that asymmetric information is one of the main antecedents of hidden action problems by policyholders. The level of trust between insurers and policyholders, and the level of pre-screening of insurers attenuate hidden action problems by policyholders. Moreover, the study reveals that self-protection attenuates hidden actions more effectively if a co-payment automobile insurance contract is at stake than if a deductible contract was signed. Finally, revealing the dark side of buyer-supplier relationships in insurance confirms the necessity for policyholders to disclose the information of whether they engage in self-protecting actions or not.

Keywords: hidden actions; dark side; opportunism; buyer-supplier relationship; BSR; asymmetric information; co-payment contract. (search for similar items in EconPapers)
Date: 2024
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