Separating Moral Hazard from Adverse Selection and Learning in Automobile Insurance: Longitudinal Evidence from France

Journal of the European Economic Association 11, 4, 897-917, 2013

50 Pages Posted: 8 Sep 2010 Last revised: 13 Jan 2023

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Pierre-Carl Michaud

University of Quebec at Montreal (UQAM) - Department of Economics; Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE); RAND Corporation, Labor and Population; IZA Institute of Labor Economics; Netspar

Maki Dahchour

Aviva Canada - National Personal Lines

Multiple version iconThere are 2 versions of this paper

Date Written: September 7, 2010

Abstract

The identification of information problems in different markets is challenging issue in the economic literature. In this paper, we study the identification of moral hazard from adverse selection and learning within the context of a multi-period dynamic model. We extend the model of Abbring et al. (2003) to include learning and insurance coverage choice over time. We derive testable empirical implications for panel data. We then perform tests using longitudinal data from France during the period 1995 -1997. We find evidence of moral hazard among a sub-group of policyholders with less driving experience (less than 15 years).

Policyholders with less than 5 years of experience have a combination of learning and moral hazard, whereas no residual information problem is found for policyholders with more than 15 years of experience.

Keywords: Moral hazard, adverse selection, learning, dynamic insurance contracting, panel data, empirical test

JEL Classification: C30, C32, C33, C35, D81, D82, G22

Suggested Citation

Dionne, Georges and Michaud, Pierre-Carl and Dahchour, Maki, Separating Moral Hazard from Adverse Selection and Learning in Automobile Insurance: Longitudinal Evidence from France (September 7, 2010). Journal of the European Economic Association 11, 4, 897-917, 2013, Available at SSRN: https://ssrn.com/abstract=1673381 or http://dx.doi.org/10.2139/ssrn.1673381

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Pierre-Carl Michaud

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE) ( email )

Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada

RAND Corporation, Labor and Population ( email )

Santa Monica, CA 90407-2138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maki Dahchour

Aviva Canada - National Personal Lines ( email )

2206 Eglinton Avenue East
Scarborough, Ontario M1L 4S8
Canada

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