The Impact of Asymmetric Information on Auto Insurance Policy in Lagos State
Keywords:auto insurance, assymetric information, insurance policy
This study investigates the impact of asymmetric information on auto insurance policies in Lagos State. The main objective is to determine the effect of asymmetric information on affect insurer’s acceptance of risk and claims payment in auto insurance. The scope of the study is the five big insurance companies in Nigeria. The survey research design was used for this study. The study population consists of 15,341, and the sample size is 390. A structured questionnaire was used to gather responses from the respondents, simple percentages and descriptive statistics were used to analyze the study, and a chi-square test was used to test the hypothesis. Based on the findings and analysis of the data, it was clear that it is possible to reduce asymmetric information in the automobile insurance market by ensuring that systems are put in place to get accurate information from the insured and do extensive research about the subject matter. It was concluded that insurance companies in Nigeria recognize the negative impact of asymmetric information on a company’s profitability and investment. It was recommended that targeted stipulations be used frequently to reduce or narrow the chances of asymmetric information auto insurance policies to take the asymmetric information factors into account and alleviate the problem areas.
Aduloju, S.A, Awoponle, A.L & Oke, S.A.(2008), Recapitalization, Mergers and Acquisitions of Nigeria Insurance Industry. Journal of Risk Finance,Vol. 9,Iss. 5,pp. 449- 466.
Aghoghobvia, (2005), Critical Success Factors for Profitable Management of Insurance Institutions. Paper presented at the Nigeria Insurers Association Workshop in Lagos.
Akaah,I.P.(1997), Influence of Deontological and Teleological Factors on Research Ethics Evaluation. Journal of Business Research,Vol. 39,Iss. 2,pp. 71-80
Akerlof, G.A., "The Market for 'Lemons':Quality Uncertainty and the Market Mechanism", Q.J.E. 84 (August 1970): 488-500.
Arvidsson, S.: (2010), “Does private information affect the insurance risk? – Evidence from the automobile insurance market”. Scandinavian working papers in economics (S-WoPEc) 2010:. .
Breuel,B.H. (1996), Complete Idiot’s Guide to Buying Insurance and Annuity (Illustrated). Alpha Books.
Carlos, P.B. & Echika, L.O. (2007), Technical Efficiency of Nigeria Insurance Companies. Journal of Risk and Insurance, Working Papers with No.2007/18.
Davis, K. & Frederick, W.C.(1984), Business and Society: Management Public Policy Ethics. (5th Ed), New York, NY, McGraw-Hill
Chiappori, P-A. and B. Salanié: (2000), “Testing for asymmetric information in insurance markets”. Journal of Political Economy 108(1), 56-77.
Cohen, A.: (2005), “Asymmetric information and learning: evidence from the automobile insurance market”. The Review of Economics and Statistics 87(2), 197-207.
Cohen, A.: (2008), “Asymmetric learning in repeated contracting: an empirical study”. NBER Working Paper No. 13752.
DeDonder, P. and J. Hindriks: (2009), “Adverse selection, moral hazard and propitious selection”. Journal of Risk and Uncertainty 38(1), 73-86.
DeMeza, D. and D. Webb: (2001), “Advantageous selection in insurance markets”. RAND Journal of Economics 32(2), 249-262.
Fang, H., M. Keane, and D. Silverman: (2006), “Sources of advantageous selection: evidence from the medigap insurance market” Working Paper no 12289, Department of Economics, Yale University.
Filipova-Neumann, L. and P. Welzel: (2010), “Reducing asymmetric information in insurance markets: Cars with black boxes”. Telematics and Informatics
Fraedrich, J. , Thorne,D. M. & Ferrell, O.C. (1994), Assessing the Application of Cognitive Moral Development Theory to Business Ethics. Journal of Business Ethics, Vol13,No.10,pp. 829-838.
Ghauri,P.and Gronhaug,K.(2005), Research Methods in Business Studies: A Practical Guide.(3rd Ed),Prentice Hall.
Goovaerts, M.J., Vylder,F. & Haezendonck (1984), Insurance Premiums. Amsterdam: North Holland Publishing
Hemenway, D.: 1990, “Propitious selection”. Quarterly Journal of Economics, 105(4), 1063-1070
Hoffer, G.E. & Miller, E.G. (1979). The distribution of automobile liability insurance: An alternative. The journal of risk and insurance, 46(3): 441-450. 7.
Horn, G. 2008. The new breed of auto parts. Canadian underwriter, 75(5): 44-48.
Hultkrantz L. and G. Lindberg: (2012), “Pay-As-You-Speed: An economic field experiment”. Scandinavian working papers in economics (S-WoPEc) No. 2009:10. (forthcoming in Journal of Transport Economics and Policy, 2012).
Hultkrantz L., J-E. Nilsson, and S. Arvidsson: (2010) “Internalization of speeding externalities”. Working Paper, Örebro University, Dept of Economics.
Hunt, S.D & Vitell, S.A (1986), General Theory of Marketing Ethics. Journal of Macromarketing,Vol.6,pp.5-16
Jeanette, N., Gregory, P.W., Alina, L. & Andreas,M. (2009), Design and Validation of a Novel New Instrument for Measuring the Effect of Moral Intensity on Accountants Propensity to Manage Earnings. Journal of Business Ethics, Vol.84,pp.367-387.
Jones, T.M.(1991), Ethical Decision Making by Individuals in Organisations: An Issue Contigent Model. Accademy of Management Review,Vol.16,Iss.2,pp.366-395.
Karagyozova P. and P. Siegelman: (2006), “Is there propitious selection in insurance markets?”. Working Paper no 2006-20. Department of Economics University of Connecticut. Rees R., and A. Wambach: 2008. “The Microeconomics of insurance”. Foundation and trends in microeconomics. Now Publishers Inc. Hanover.
Kneuper, R. & Yandle, B. 1994. Auto insurers and the air bag. The journal of risk and insurance, 61(1): 107- 116.
Kohlberg, L. (1969), Stage and Sequence: The Cognitive-Developmental Approach to Socialization. Handbook of Socialization Theory and Research.
Kohlberg, L. (1981), Essays on Moral Development: The Philosophy of Moral Development. San Francisco, CA: Harper and Row.
Kohlberg, L. (1984), The Philosophy of Moral Development, Harper and Row Publishers, New York.
Litman, T. (2005). Pay-as-you-drive pricing and insurance regulatory objectives. Journal of insurance regulation, 23(3): 35-53.
Perissinotti, L. (2008). Safety at what price? Canadian underwriter, 75(5): 54 & 57. 11.
Santam Limited. 2007. South African short-term insurance market 2006. Tyger Valley: Santam Finance. 12.
Sloan, F.A. & Githens, P.B. (1994). Drinking, driving, and the price of automobile insurance. The journal of risk and insurance, 61(1): 33-58. 13.
Tryfos, P. (1987). The equity of classification systems in automobile insurance. The journal of risk and insurance, 54(3): 569-581. 14.
Viaene, S., Ayuso, M., Guillen, M., Van Gheel, D. & Dedene, G. 2007. Strategies for detecting fraudulent claims in the automobile insurance industry. European journal of operational research, 176(1): 565-569. 15.
Weiss, P. 1998. Curbing air bags‘ dangerous excesses. Science news, 154(13): 206-207. 16.
Wiegers, W.A. 1989. The use of age, sex, and marital status as rating variables in automobile insurance. The University of Toronto law journal, 39(2): 149-210. 17. Witt, R.C. 1979
How to Cite
Copyright (c) 2023 Oluwaleke Ebenezer Akindipe, Professor Yusuf
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.