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A Test of Asymmetric Learning in Competitive Insurance With Partial Information Sharing
Author(s) -
Shi Peng,
Zhang Wei
Publication year - 2016
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12056
Subject(s) - actuarial science , business , profit (economics) , auto insurance risk selection , test (biology) , insurance policy , economics , microeconomics , casualty insurance , paleontology , biology
This article examines whether an insurer could gain advantageous information on repeat customers over its rivals in the Singapore automobile insurance market, which is featured by partial information sharing among insurers. We find that the insurer does update and accumulate more information regarding its policyholders’ riskiness through repeated observations and thus make higher profits with repeat customers especially those of lower risk. We also show that the higher profit is driven by the fact that low risks tend to stay longer with the insurer, and in the meanwhile, they are charged a premium higher than their actuarial risk level.