Working papers in Transport Economics
Empirical analysis of moral hazard: a study of a vehicle insurance tax reform
Abstract: This paper uses discrete choice and count data models to
analyze the effects of a tax on vehicle insurance levied in Sweden in 2007.
The analysis is based on a large set of micro-level panel data on
individual insurance holders at the largest insurance company in Sweden for
the period 2006-2010. Two questions are addressed: How did the tax reform
influence the choice of insurance coverage, and how did changes in coverage
affect the incidence of claims? The results show that, on average, the tax
reform increased the odds of choosing lower insurance coverage by 47
percent, and that the tax reform had more impact on older drivers. However,
switching to lower coverage due to the tax reform has not resulted in
significant changes in claim distributions, though the incidence of claims
decreased by 20 percent for switchers aged 35-44 in the pre-reform period,
indicating a mitigation of ex ante moral hazard in vehicle insurance.
Keywords: Vehicle insurance; Moral hazard; Traffic safety; Tax reform; (follow links to similar papers)
JEL-Codes: C33; C54; D82; H20; L51; (follow links to similar papers)
46 pages, September 19, 2013
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