Moral Hazard and Repeated Insurance Contracts∗

In this paper, we work with a repeated insurancemodel, and examine the influ-ence of experience-rating on moral hazard of insured individuals in a competitive framework. We show that in equilibrium, individuals take care to avoid accident in period 1 even if precaution is unobservable to insurance companies. Also indi-viduals may refrain from filing a claim after an accident has happened for fear of penalties imposed by their insurers in future. We then investigate the comparative statics of the model and discuss the empirical relevance of these predictions