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|Title: ||Rationality Test of Rate-making Decision in Insurance Market|
|Issue Date: ||2016-12-09 10:58:56 (UTC+8)|
The objective of this paper is to investigate empirically the process of insurance rate-making decision to see whether insurers set price based on rational expectations. Because of periodic fluctuations of underwriting profits in property-liability insurance industry, it has been a controversy whether insurance price is rationally set. Some of the previous literature argues that fluctuations result from irrational pricing decision. On the other hand, other studies suggest that profit fluctuations might be generated even if insurers set prices under rational expectations. However, these studies have not provided an empirical analysis of market rationality. Thus it is of interest to conduct a rationality test for pricing decision in insurance market. The findings of this paper suggest that market rationality hypothesis cannot be rejected for property-liability insurance industry.
|Data Type: ||article|
|Appears in Collections:||[Issue 71] Journal Articles|
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