Work

Does Drunk-Driving Liability Insurance Induce Asymmetric Information in the Insurance Market?

Year: 2025

Type: article

Abstract: Commercial drunk-driving liability insurance may incentivize the insured’s drunk driving or attract drinkers’ purchase. This paper investigates whether drunk-driving liability insurance elicits the insured’s opportunistic motive. Empirical results show that the insured who purchase drunk-driving liability insurance have a higher possibility of incurring a drunk-driving accident, suggesting that drunk-driving liability insurance may induce adverse selection or moral hazard. On the other hand, after an amendment to the Criminal Code of Taiwan in June 2013, stricter standards for offenses against public safety and aggravated criminal liability have not altered policyholders’ demand for drunk-driving liability insurance but reduced the probability of drunk-driving accidents. The imposition of mandatory stipulations on drunk driving is therefore not associated with the alleviation of adverse selection but can reduce the moral hazard induced by drunk-driving liability insurance.

Source: The B E Journal of Economic Analysis & Policy

DOI: 10.1515/bejeap-2024-0360

Authors: Chun-Ting Liu, Jui-Yun Wu, Chi-Hung Chang

Institutions: National Taichung University of Science and Technology, Feng Chia University

Language: English

Topic: Insurance and Financial Risk Management

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,712