The importance of the choice of test for finding evidence of asymmetric information

Author: Catherine Donnelly, Martin Englund, Jens Perch Nielsen
Publisher: Cambridge University Press (CUP)

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AbstractWe put one of the predictions of adverse-selection models to the test, using data from the Danish automobile insurance market: that there is a positive correlation between claims risk and insurance coverage. We can find a statistically significant insurance coverage--risk correlation when coverage is expressed relative to the insurance premium, but not when it is expressed in monetary terms.</jats:p

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