Title: Quantifying the Premium Externality of the Uninsured

Speaker: Assistant Professor Teng Sun, Peking University 

Time: November 7th, 2016 13:30–15:00 

Venue: Conference Room 106B, Zhonghui Building (College of Economics, JNU)

Abstract:

In insurance markets, the uninsured can generate a negative externality on the insured, leading insurance companies to charge higher premia. Using a novel panel data set and a staggered policy change that introduces exogenous variation in the rate of uninsured drivers at the county level in California, we find that uninsured drivers lead to higher insurance premia: a 1 percentage point increase in the rate of uninsured drivers raises premia by roughly 1%. We calculate the monetary fine on the uninsured that would fully internalize the externality and conclude that actual fines in most US states are inefficiently low.