Expiration Dates in Automobile Insurance Contracts: The Curious Case of Last Policy Month Claims in Taiwan

This paper investigates a widespread trend in the Taiwanese automobile insurance market in which the loss claims of vehicle damage insurance contracts have a high propensity to occur just before the end of the policy year (as opposed to calendar year). We show that certain uncommon characteristics of claim data are consistently observed in the last policy month. We indirectly show that there is a severe time-varying excess claim problem in this market. The major sources of excess claims can be explained by the bonus-malus system problem and the auto-dealer incentive issue.