| Abstract: |
This paper empirically analyzes moral hazard in car insurance using a dynamic
theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post
moral hazard) choices and Dutch longitudinal micro data. We use the theory to
characterize the heterogeneous dynamic changes in incentives to avoid claims
that are generated by the Dutch experience-rating scheme, and their effects on
claim times and sizes under moral hazard. We develop tests that exploit these
structural implications of moral hazard and experience rating. Unlike much of
the earlier literature, we find evidence of moral hazard. |