Estimating Risk and Risk Aversion in the Automobile Insurance Market

Abstract

This paper is based on the structural model proposed by Cohen and Einav [2007]
to estimate the joint distribution of risk and risk aversion in the automobile insurance
market. However, while they estimated the model for a single insurer in the Israeli
market, we estimated the model by considering the top ve insurers in the Brazilian
market at the same time. This difference allowed us to capture the eect of competition
on the joint distribution of risk and risk aversion. A counterfactual exercise allowed
us to verify that the insurer with the largest market share can implement the optimal
contract, while the others do not.