Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance

This paper analyzes ex ante and ex post moral hazard in car insurance using Dutch longitudinal micro data. We specify a dynamic model of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices. We use this model to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme. We then develop semi-parametric methods that exploit these predictions and data on claim times and sizes to test for moral hazard. We find some evidence of moral hazard.