Asymmetric information and the settlement of insurance claims

The authors present a version of Spier's (1992) dynamic model of litigation and use it to derive predictions about the duration of legal claims against motor insurers. Those predictions are tested against a unique set of case data collected from an English motor insurer. The main predictions are supported, with one exception. The authors' results suggest that information plays a key role in such cases and indicate that insurers may be able to speed cases by taking steps to collect information at early stages in a case. They also suggest that different forms of plaintiff finance (including insurance) can affect case duration. Finally, the results suggest a role for signaling models of litigation.