A copula-based panel data model for pricing insurance contracts with endogenous deductibles
Summary Insurers adjust premiums for renewing policyholders based on past claims, a practice known as experience rating. This paper examines experience rating in insurance contracts with deductibles, a key instrument for mitigating inefficiencies arising from information asymmetry between policyholders and insurers. We propose a copula-based panel data model that accounts for the endogeneity of deductible choice, particularly when the assumption of contemporaneous exogeneity…