Empirical Issues

In the last decade or so, numerous papers have been devoted to empirical investigations based on contract theory. Many contributions use insurance data, and specifically files pro-vided by firms. A typical paper would analyze the relationship between individual characteris-tics, the contracts chosen and the corresponding “outcome, ” as measured by claims. The natural next step in this research agenda is to model empirically market equilibrium on insurance markets. Empirical models of com-petitive insurance markets are important in many respects. First, such models are an indis-pensable first step for the empirical analysis of existing markets. The discussion of optimal pricing strategies or the definition of new insur-ance contract would greatly benefit from such models. From a policy perspective, the design of any regulation requires estimating its likely impact on the market allocation. For instance, while a ban on specific pricing options (based, say, on gender or age) is often advocated on ethi-cal grounds, a precise assessment of its impact on insurance markets is needed before any deci-sion is made; and an empirical model is required to provide such an assessment