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A Test of Asymmetric Learning in Competitive Insurance With Partial Information Sharing

Authors

  • Peng Shi,

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    • Peng Shi is at the Department of Actuarial Science, Risk Management, and Insurance, School of Business, University of Wisconsin–Madison, Madison, WI 53706. Shi can be contacted via e-mail: pshi@bus.wisc.edu. Wei Zhang is at the Department of Economics, Northern Illinois University, DeKalb, IL 60115. Zhang can be contacted via e-mail wzhang1@niu.edu. The authors wish to express their gratitude to Editor Keith Crocker and an anonymous referee for their valuable comments that helped improve the article.
  • Wei Zhang

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    • Peng Shi is at the Department of Actuarial Science, Risk Management, and Insurance, School of Business, University of Wisconsin–Madison, Madison, WI 53706. Shi can be contacted via e-mail: pshi@bus.wisc.edu. Wei Zhang is at the Department of Economics, Northern Illinois University, DeKalb, IL 60115. Zhang can be contacted via e-mail wzhang1@niu.edu. The authors wish to express their gratitude to Editor Keith Crocker and an anonymous referee for their valuable comments that helped improve the article.

Abstract

This article examines whether an insurer could gain advantageous information on repeat customers over its rivals in the Singapore automobile insurance market, which is featured by partial information sharing among insurers. We find that the insurer does update and accumulate more information regarding its policyholders’ riskiness through repeated observations and thus make higher profits with repeat customers especially those of lower risk. We also show that the higher profit is driven by the fact that low risks tend to stay longer with the insurer, and in the meanwhile, they are charged a premium higher than their actuarial risk level.

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