Estimating the total cost of moral hazard
Two types of moral hazard exist: ex ante and ex post.
Two types of moral hazard exist: ex ante moral hazard is the effect that the possession of insurance may have on the loss due to an insurable event and ex post moral hazard is the effect that insurance may have on the loss once the insured event occurs. The expected loss of the insured event is the sum of these effects. In this analysis, we test for total moral hazard in a market for automobile insurance using a mixed-process estimator (MPE) approach.