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A symmetric I nformation in the H ome I nsurance M arket
Author(s) -
Aarbu Karl Ove
Publication year - 2017
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.12084
Subject(s) - adverse selection , moral hazard , private information retrieval , information asymmetry , test (biology) , hazard , business , microeconomics , economics , actuarial science , chemistry , computer science , incentive , biology , computer security , paleontology , organic chemistry
A bstract We test for the presence of asymmetric information in the home insurance market on a data set containing about half a million home insurance contracts, applying several different specifications of the conditional correlation test. Unlike earlier studies, we control for private information about risk aversion by having access to detailed administrative register information at the policyholder level. We find robust evidence of asymmetric information. Asymmetric information may stem from adverse selection or moral hazard. To disentangle moral hazard and adverse selection, we utilize an exogenous law reform that had an effect on the insurance price. Our test shows no indication of moral hazard.