Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling
The present paper investigates the adverse selection problem by examining the relationship between accident occurrences and deductible choice utilizing a seemingly unrelated probit model that allows for best controls for unobserved heterogeneity and endogeneity. While this microeconometric analysis...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2017-01-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/23322039.2017.1330303 |
| _version_ | 1818406554556170240 |
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| author | Noureddine Benlagha Imen Karaa |
| author_facet | Noureddine Benlagha Imen Karaa |
| author_sort | Noureddine Benlagha |
| collection | DOAJ |
| description | The present paper investigates the adverse selection problem by examining the relationship between accident occurrences and deductible choice utilizing a seemingly unrelated probit model that allows for best controls for unobserved heterogeneity and endogeneity. While this microeconometric analysis does not consider a multivariate model and considers only two types of contracts, namely, those with high and low deductibles, it does suggest important implications from applying a recursive bivariate probit. We employ new cross-sectional data on a Tunisian insurance portfolio containing 31,125 policyholders. The results support some evidence for residual adverse selection in the studied insurance portfolio. Moreover, the results suggest the presence of a wealth effect in the decision of the contract choice. |
| first_indexed | 2024-12-14T09:13:47Z |
| format | Article |
| id | doaj.art-74cca04779234a4a92a59acb2fdbe4cb |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-12-14T09:13:47Z |
| publishDate | 2017-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-74cca04779234a4a92a59acb2fdbe4cb2022-12-21T23:08:29ZengTaylor & Francis GroupCogent Economics & Finance2332-20392017-01-015110.1080/23322039.2017.13303031330303Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modellingNoureddine Benlagha0Imen Karaa1College of Business and Economics, Qatar UniversityUniversity of SfaxThe present paper investigates the adverse selection problem by examining the relationship between accident occurrences and deductible choice utilizing a seemingly unrelated probit model that allows for best controls for unobserved heterogeneity and endogeneity. While this microeconometric analysis does not consider a multivariate model and considers only two types of contracts, namely, those with high and low deductibles, it does suggest important implications from applying a recursive bivariate probit. We employ new cross-sectional data on a Tunisian insurance portfolio containing 31,125 policyholders. The results support some evidence for residual adverse selection in the studied insurance portfolio. Moreover, the results suggest the presence of a wealth effect in the decision of the contract choice.http://dx.doi.org/10.1080/23322039.2017.1330303adverse selectioncar insuranceendogeneityseemingly unrelated probit |
| spellingShingle | Noureddine Benlagha Imen Karaa Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling Cogent Economics & Finance adverse selection car insurance endogeneity seemingly unrelated probit |
| title | Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling |
| title_full | Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling |
| title_fullStr | Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling |
| title_full_unstemmed | Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling |
| title_short | Evidence of adverse selection in automobile insurance market: A seemingly unrelated probit modelling |
| title_sort | evidence of adverse selection in automobile insurance market a seemingly unrelated probit modelling |
| topic | adverse selection car insurance endogeneity seemingly unrelated probit |
| url | http://dx.doi.org/10.1080/23322039.2017.1330303 |
| work_keys_str_mv | AT noureddinebenlagha evidenceofadverseselectioninautomobileinsurancemarketaseeminglyunrelatedprobitmodelling AT imenkaraa evidenceofadverseselectioninautomobileinsurancemarketaseeminglyunrelatedprobitmodelling |