Abstract
Automobile insurance is one of the main pillars of the entire insurance industry in the developed economies. Knowing as much as possible about the factors related to the accidents is an essential issue for the insurance companies so that they may improve their levels of efficiency. Therefore, in this paper we focus on studying the most relevant variables that help explain the registration of claims in the automobile insurance sector. For this purpose, we fit a probit model specification using a database from a Spanish insurance company. Our research points out the significance of certain variables, such as the policyholders’ driving experience, their region of residence as well as their levels of insurance coverage, towards the likelihood of registering an insurance claim. However, probit analysis represents only one of the multiple perspectives which we can consider to examine the question of accidents and their reporting. Very briefly, we also discuss the utility of zero-inflated count data models to study the number of accidents declared by policyholders. Finally, we point out the possibilities that thinned models could offer for this type of research.
Highlights
Automobile insurance is one of the most important branches of the whole insurance industry in all modern countries
Characteristics of the insured vehicle, such as its category and use, others relating to the driver, such as age, gender, driving experience and area of residence, and those relating to the policies, as its annual premium and the chosen level of insurance coverage, are some of the variables that are ordinarily taken into consideration by insurance companies
One of the most important results we find in our econometric analysis refers to the evidence of positive relationship between the claims and the level of insurance coverage contracted by the policyholders, shown by other authors as well
Summary
Automobile insurance is one of the most important branches of the whole insurance industry in all modern countries. One of the most important results we find in our econometric analysis refers to the evidence of positive relationship between the claims and the level of insurance coverage contracted by the policyholders, shown by other authors as well. It is the case, for instance, of the work by Puelz and Snow (1994), that offers a similar conclusion with other methodology, based in a two-equation model and data of Georgia, USA.
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