The Effect of the Introduction of a» Pay Per Use «Option within motor TPL insurance
Publisher
University of Warsaw, Faculty of Management
Source
Journal of Banking and Financial Economics, 1(1), 73–87
Date Issued
2014
Author(s)
Trappl, Stefan
Pichler, Robert
Abstract
In this paper the effects of the introduction of the so called “pay per use” -insurance products are examined. These products collect data of kilometers driven by policy holders. As a result of this data, policy holders can get a refund on the insurance-premium paid. Since there is a positive correlation between mileage and the risk of causing an accident the refund is granted to low-mileage drivers, so in theory the “pay per use” product is more attractive to low-mileage drivers than to long-distance drivers. The authors examine empirical evidence to find out whether or not it is mainly low-mileage-drivers who choose the “pay per use” product. Secondly, the authors examine whether there are other significant differences between characteristics of “pay per use” policy-holders and “traditional” policy- holders. Therefore a random sample of 4,000 car-insurance - clients (2,000 “pay per use” policy- holders and 2,000 “traditional” policy-holders) is reviewed. In addition the effects of the introduction of “pay per use” products are discussed, in case of a selection effect between low- and high -mileage drivers is observed.
Subjects
Insurance
Pay per Use
Pay as you Drive
Adverse Selection
Selection Effects
Type
info:eu-repo/semantics/article
Wissenschaftlicher Artikel