Testing for Asymmetric Information in Tunisian Automobile Insurance Market

Abstract

Asymmetric information has become one of the most influential theoretical concepts in explaining competitive insurance market. In contract theory, asymmetric information is the situation when one party of an economic transaction possesses information that is not available to the other contractual party.In this perspective, this paper aims to investigate the presence of asymmetric information in Tunisian automobile insurance market. This investigation is made using an individual data set during the year 2009. For this purpose, we employ two empirical approaches; the bivariate probit model and the two stages approach of Richaudeau (1999). Hence, results show a strong evidence for the presence of asymmetric information for the begging drivers. Inversely, for the experienced drivers, no evidence of asymmetric information have been detected.

DOI: 10.5901/mjss.2015.v6n3s1p455