A Test of Asymmetric Learning in Competitive Insurance With Partial Information Sharing

A Test of Asymmetric Learning in Competitive Insurance With Partial Information Sharing

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Article ID: iaor20163004
Volume: 83
Issue: 3
Start Page Number: 557
End Page Number: 578
Publication Date: Sep 2016
Journal: Journal of Risk and Insurance
Authors: ,
Keywords: learning
Abstract:

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.

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