Price Cutting in Liability Insurance Markets

Loading...
Thumbnail Image
Penn collection
Health Care Management Papers
Degree type
Discipline
Subject
Education Economics
Insurance
Other Education
Real Estate
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Harrington, Scott. E
Danzon, Patricia. M
Contributor
Abstract

This article analyzes alleged underpricing of general liability insurance prior to the mid-1980s liability insurance "crisis." The theoretical analysis considers whether moral hazard and/or heterogeneous information for forecasting claim costs can cause some firms to price too low and depress other firms' prices. Cross-sectional analysis of insurer loss forecast revisions (which should be greater for firms with low prices caused by moral hazard or hetero- geneous information) and premium growth provides evidence consistent with low pricing due to moral hazard but not heterogeneous information. The evidence also implies that shifts in the loss distribution produced large industrywide forecast errors.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
1994-10-01
Journal title
The Journal of Business
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection