The Real Effects of the Uninsured on Premia

Constantine Yannelis and Stephen Teng Sun

MPRA Paper from University Library of Munich, Germany

Abstract: In some insurance markets, the uninsured can generate a negative externality on the insured, leading insurance companies to pass on costs as higher premia. Using a novel panel data set and a staggered policy change that exogenously varied the rate of uninsured drivers at the county level in California, we quantitatively investigate the effect of uninsured motorists on automobile insurance premia. Consistent with predictions of theory, we find uninsured drivers lead to higher insurance premia. Specifically, a 1 percentage point increase in the rate of uninsured drivers raises insurance premia by between 1-2%. We also discuss corrective Pigouvian taxes.

Keywords: Insurance; externality; uninsured; Pigouvian tax (search for similar items in EconPapers)
JEL-codes: G22 H21 H23 R40 (search for similar items in EconPapers)
Date: 2013-05-20
New Economics Papers: this item is included in nep-ias
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https://mpra.ub.uni-muenchen.de/48264/1/MPRA_paper_48264.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/49736/14/MPRA_paper_49736.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/50087/1/MPRA_paper_50087.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48264

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