An Empirical Analysis of Moral Hazard and Experience Rating

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Abstract
For many years, economists and actuaries have studied multiperiod insurance contracts independently and differently. Our aim in this article is to reduce the gap between empirical studies on the determination of insurance premiums and theoretical studies on moral hazard and experience rating. The first objective is to verify empirically the proposition that past experience is a good predictor of risk by using data from a random sample consisting of 19,013 car drivers in Quebec. The second objective is to construct a multivariate multiperiod pricing formula for automobile insurance in order to reduce the ill-effects of moral hazard.

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