Unpriced and unseen: private information and taxi insurance purchases in Taiwan

Yen-Chih Chen, Wen-Yen Hsu and Carol Troy ()
Additional contact information
Yen-Chih Chen: Feng Chia University
Wen-Yen Hsu: Feng Chia University
Carol Troy: Tunghai University

The Geneva Papers on Risk and Insurance - Issues and Practice, 2024, vol. 49, issue 4, No 7, 867 pages

Abstract: Abstract The role of information asymmetry in automobile insurance markets has been studied extensively. However, not all empirical studies found correlation between driver risk and chosen coverage. There are two explanations for this (Cohen and Siegelman 2010): (1) information asymmetry may not characterise environments in which consumers cannot act on private information; (2) most studies measure not risky driver behaviour, but ex post realisations of such behaviour, e.g. claims. In Taiwan’s taxi insurance market, insurers cannot freely use rating factors. Usage density (e.g. daily distance), a direct measure of risk, therefore constitutes private information. Using ordinary least squares models, we find that usage density is positively correlated with total premiums. Using logistic models, we find high-density drivers more likely to buy additional policies. Thus, usage density is positively correlated with insurance demand, consistent with the risk-coverage hypothesis. Unlimited-mileage coverage may disproportionately attract high-risk drivers, an argument in favour of usage-based insurance.

Keywords: Asymmetric information; Adverse selection; Moral hazard; Automobile damage insurance; Automobile liability insurance; Automobile theft insurance (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41288-023-00306-9 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:49:y:2024:i:4:d:10.1057_s41288-023-00306-9

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

DOI: 10.1057/s41288-023-00306-9

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 ().