Asymmetric Information in the Market for Automobile Insurance: Evidence from Germany
Inhalt
Asymmetric information is an important phenomenon in insurance markets, but the empirical evidence on the extent of adverse selection and moral hazard is mixed. Because of
its implications for pricing, contract design, and regulation, it is crucial to test for asymmetric information in specic insurance markets. In this paper, we analyze a recent data set on
automobile insurance in Germany, the largest such market in Europe. We present and compare a variety of statistical testing procedures. We find that the extent of asymmetric information
depends on coverage levels and on the specic risks covered which enhances the previous literature. Within the framework of Chiappori et al. (2006), we also test whether drivers have
realistic expectations concerning their loss distribution, and we analyze the market structure.
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