Economics, Econometrics and Finance
3 years ago

Study reveals auto insurance fraud driving up repair costs by 46.8%

Annals of Actuarial Science
Empirical tests for <i>ex post</i> moral hazard in a market for automobile insurance
David Rowell, Son Nghiem, Luke B. Connelly

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Ex post moral hazard in car insurance means people can affect repair costs after an accident. In Australia, a study of 994 car crashes showed that this moral hazard increased repair costs by almost 47%. About 9% of this increase was due to more parts being fixed after the accident. This shows that some people might try to get more repairs done to benefit financially.