Asymmetric information in insurance : some testable implications.

Summary Several recent papers on insurance econometrics have tested the existence of a positive correlation between coverage and risk, which is predicted by the usual pure anti-selection and moral hazard models. However, these models are based on very restrictive assumptions. The authors give a testable implication of asymmetric information that is valid in a very broad class of models. They then show how the positive correlation property extends when the insurance market is competitive or when risk aversion is public. They then test the results on French data.