Internet diffusion and free riding in insurance markets: An empirical investigation

This paper studies the effect of internet diffusion on free riding in insurance markets, with a focus on automobile insurance. Internet usage affects both the demand and supply sides of insurance markets, while also having a bearing on institutions. Our cross‐sectional analysis based on the United States supports the main hypothesis that greater internet diffusion reduced free riding by uninsured motorists. This response was fairly elastic and the reduction in the prevalence of uninsured motorists holds across different empirical specifications. Implications of these findings are discussed.