Asymmetric information and Turkish insurance sector: An empirical application in Automobile Insurance Market Gaziantep

Asymmetric information constitutes a negative impact on the market equilibrium price since it features a restriction on the trade. In daily life, its effects can be seen in the basis of many cases such as economy, social relations, politics and in markets. Therefore, the asymmetric information may lead to a marketing crash depending on its impact. Similarly, insurance market is also affected by the asymmetric information. This market plays an essential role on the general economoy by transferring uncertainty and risk of the national economy to develop the capital market. Recently, it is getting significant to do studies aiming to find empirical evidence for asymmetric information on the insurance market. Practical results obtained in these studies can be directly applicable to the real life and therefore the issue becomes more attractive in academia. When Turkish Insurance Market is considered there is no available empirical study on this topic. Hence, in the study, it is is aimed to find empirical evidences of the existence of asymmetric information in Turkish Insurance Market. Specifically, the study focuses the automobile insurance since the insurance market itself is relatively large. A set of data from customers of Gaziantep Agency of a large insurance company in Turkey is included. The consumers attended the insurance in a time period of 09.2008 to 09.2010. Two separate attempts have been performed for the analyzes by utilizing commonly used probit and logit models in literature. The results show that the existance of asymmetric information is not validated empirically on the data set of Turkish Automobile Insurance Market which is obtained in Gaziantep.Key Words: Asymmetric information, evidence of asymmetric information, insurance, probit, Turkish Insurance Market.