The property-liability insurance market in Taiwan has implemented three-stage deregulation on rate-making since 2002. This research investigates whether the rating liberalization brought about improvements in efficiency and productivity of the property-liability insurance market. Using data on property-liability insurers in Taiwan over 2001 to 2019 and employing data envelopment analysis, we show that technical, cost, and revenue efficiencies have improved after rating liberalization. Post-liberalization productivity has improved as well, and the decomposition of productivity change demonstrates that change in technology contributes most to productivity improvement at the inception of liberalization, and the contribution of efficiency improvement follows when rating controls are further released. Further analyses reveal that technical and revenue efficiency rose in the third stage of liberalization and cost efficiency improved in the second and third stages. Our findings suggest that the removal of price controls creates an operating environment with less restrictions and thus favors progress in efficiency of the property-liability insurance market.

Commercial drunk-driving liability insurance may incentivize the insured’s drunk driving or attract drinkers’ purchase. This paper investigates whether drunk-driving liability insurance elicits the insured’s opportunistic motive. Empirical results show that the insured who purchase drunk-driving liability insurance have a higher possibility of incurring a drunk-driving accident, suggesting that drunk-driving liability insurance may induce adverse selection or moral hazard. On the other hand, after an amendment to the Criminal Code of Taiwan in June 2013, stricter standards for offenses against public safety and aggravated criminal liability have not altered policyholders’ demand for drunk-driving liability insurance but reduced the probability of drunk-driving accidents. The imposition of mandatory stipulations on drunk driving is therefore not associated with the alleviation of adverse selection but can reduce the moral hazard induced by drunk-driving liability insurance.