Moral Hazard and Advantageous Selection in Private Disability Insurance

  • Sebastian SoikaEmail author


We analyse asymmetric information in private long-term disability insurance. Using the elimination period as a measure of coverage, we examine the correlation between risk and coverage. Our unique data set includes both group and individual insurance. We are thus able to disentangle moral hazard and selection in individual insurance by controlling for moral hazard using group insurance. Our results provide evidence of moral hazard and advantageous selection in the individual private long-term disability insurance market. Thus, we provide guidelines for policymakers and insurers on the presence of asymmetric information in disability insurance and on future attempts to reduce it.


adverse selection advantageous selection moral hazard asymmetric information disability insurance 



I would like to thank Johannes Jaspersen, Richard Peter, Philipp Schaper, Martin Spindler, Justin Sydnor, participants of the World Risk and Insurance Economics Congress 2015, and participants of the Chubb Research Symposium at St. John's University as well as two anonymous referees for their valuable comments.


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Copyright information

© The International Association for the Study of Insurance Economics 2017

Authors and Affiliations

  1. 1.Institute for Risk Management and InsuranceLudwig-Maximilians-Universitaet MunichMunichGermany

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