Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194681 
Year of Publication: 
2017
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 5 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2017 [Pages:] 1-15
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
The present paper investigates the adverse selection problem by examining the relationship between accident occurrences and deductible choice utilizing a seemingly unrelated probit model that allows for best controls for unobserved heterogeneity and endogeneity. While this microeconometric analysis does not consider a multivariate model and considers only two types of contracts, namely, those with high and low deductibles, it does suggest important implications from applying a recursive bivariate probit. We employ new cross-sectional data on a Tunisian insurance portfolio containing 31,125 policyholders. The results support some evidence for residual adverse selection in the studied insurance portfolio. Moreover, the results suggest the presence of a wealth effect in the decision of the contract choice.
Subjects: 
adverse selection
car insurance
endogeneity
seemingly unrelated probit
JEL: 
D86
C33
C35
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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