Big Data and Insurance: Advantageous Selection in European Markets. (23rd June 2017)

• Record Type: Journal Article
• Authors: Corea, Francesco
• Is Part Of: Data science journal. Volume 16(2017)
• Publication Date: 2017-06-23
• Subjects: Adverse selection -- Asymmetric information -- Fixed-effects -- Annuity -- Long-term care -- Medigap; Science -- Data processing -- Periodicals; Database management -- Periodicals; 502.85
• DOI: 10.5334/dsj-2017-033
• Languages: English
• ISSNs: 1683-1470

Abstract

Rothschild and Stiglitz (1976 ) argued that people signal their risk profile through their insurance demand, i.e. individuals with a high risk profile would buy insurance as much as they can, while people who are not going to buy any insurance are the ones with a lower risk profile. This issue is commonly known as adverse selection. Even if their prediction seems to work quite well in a lot of different markets, Cutler et al. (2008 ) proved that there exist some insurance markets in United States in which the expected result is completely different. In the wake of this study, we provide empirical evidences that there are some European insurance markets in which the low risk profile agents are the ones who buy more insurance.