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THE IMPORTANCE OF THE CHOICE OF TEST FOR FINDING EVIDENCE OF ASYMMETRIC INFORMATION
Published online by Cambridge University Press: 15 January 2014
Abstract
We 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.
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- Copyright © ASTIN Bulletin 2014
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