Testing for Information Asymmetry in Automobile Insurance: Sample from Slovak Republic
Testing for Information Asymmetry in Automobile Insurance: Sample from Slovak Republic

Author(s): Zuzana Brokešová, Erika Pastoráková, Tomáš Ondruška
Subject(s): Business Economy / Management, Financial Markets, Business Ethics
Published by: Masarykova univerzita nakladatelství
Keywords: moral hazard; adverse selection; insurance; motor insurance;
Summary/Abstract: Neoclassical economics assume perfect information to all market participants about prices and quality of goods and services offered in the market. However, in many cases individuals remain only partially informed, resulting in state where some market participants have more information than the others. Importance of information balance increases significantly, especially, in the case of services with no immediate outcome, such as financial products, and particularly insurance. The paper focuses on the information asymmetry in insurance market. We use the micro-data about automobile insurance from Slovak insurance company to verify presence of information asymmetry in insured-insurer relation. Based on the results of the empirical data analysis, we have not find any correlation between coverage and loss in our dataset. This result does not prove absence of information asymmetry in the insurance market and it could imply that private information of individuals affects this analysis.

• Details
• Contents