The Effect of the Introduction of a »Pay Per Use« Option within motor TPL insurance

• Authors: Trappl Stefan , Zehetner Karl , Pichler Robert
• Languages of publication: EN

Abstracts

EN

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.

Keywords

EN

Insurance; Pay per Use; Pay as you Drive; Adverse Selection; Selection Effects

• Publisher: Uniwersytet Warszawski. Wydawnictwo Naukowe Wydziału Zarządzania
• Journal: Journal of Banking and Financial Economics
• Year: 2014
• Issue: 1(1)
• Pages: 73-87

Dates

published

2014-05-19

Contributors

author

Trappl Stefan

• FHWien University of Applied Sciences of WKW, Austria

author

Zehetner Karl

• FHWien University of Applied Sciences of WKW, Austria

author

Pichler Robert

• FHWien University of Applied Sciences of WKW, Austria

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Identifiers

ISSN

2353-6845

DOI

10.7172/2353-6845.jbfe.2014.1.5