Moral Hazard and Advantageous Selection in Private Disability Insurance

Sebastian Soika ()
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Sebastian Soika: Ludwig-Maximilians-Universitaet Munich

The Geneva Papers on Risk and Insurance - Issues and Practice, 2018, vol. 43, issue 1, No 5, 97-125

Abstract: Abstract We analyse asymmetric information in private long-term disability insurance. Using the elimination period as a measure of coverage, we examine the correlation between risk and coverage. Our unique data set includes both group and individual insurance. We are thus able to disentangle moral hazard and selection in individual insurance by controlling for moral hazard using group insurance. Our results provide evidence of moral hazard and advantageous selection in the individual private long-term disability insurance market. Thus, we provide guidelines for policymakers and insurers on the presence of asymmetric information in disability insurance and on future attempts to reduce it.

Keywords: adverse selection; advantageous selection; moral hazard; asymmetric information; disability insurance (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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DOI: 10.1057/s41288-017-0055-2

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