Husband-Wife Decision Making in Purchasing and Renewing Auto Insurance

Predictors of family decision-making responsibility in the purchase of life, auto, and homeowner insurance were investigated for a sample of 1,462 families. Employment status of the wife and education of the husband were found to discriminate most between which family member(s) is responsible for insurance-purchasing decisions. Other significant discriminating variables included wife's educational level, husband's employment status, family income, and husband's occupation. A high degree of consistency was found in the predictive value of these characteristics across life, auto, and homeowner insurance. Findings suggest that the decision maker within the family can be identified based on demographic characteristics. Purchasing life, automobile, or homeowner insurance involves a major purchase decision for many families. After all, with the annual premium paid by most families and the limited alternatives available for spreading risk . . . the importance of the purchase decision [for insurance] would appear substantial [6, p. 483]. The magnitude of importance of the insurance purchase decision is manifested by the dollar value of premiums consumers in the United States pay out each year. For example, in 1980 consumers paid out over $31.7 billion in automobile insurance premiums [3] and more than $10 billion in homeowner insurance premiums [23]. Moreover, between 1975 and 1980 life insurance premiums increased by 39 percent to $40.8 billion [28]. Given that consumers spend sums of money on insurance, a key question facing insurance marketers is who in the family makes the insurance purchase decision. The answer to this question would be instructive in the The authors gratefully acknowledge anonymous referees and the editors for their helpful suggestions on earlier versions of this article. Steven J. Skinner is an Assistant Professor of Marketing at the University of Kentucky, and Alan J. Dubinsky is a Visiting Associate Professor of Marketing at the University of Minnesota. This content downloaded from 157.55.39.177 on Wed, 16 Nov 2016 04:30:36 UTC All use subject to http://about.jstor.org/terms 514 Purchasing Insurance design and implementation of marketing programs directed at insurancepurchasing families. Some previously published research has focused on savings and investment decisions (of which insurance is a part) vis-a-vis family decision making [ 11 ]. For example, prior empirical work has examined the relationship between various demographic variables (such as spouse education, spouse occupation, household income, household net worth, number of children, and life cycle) and amount and type of life insurance purchased and premium expenditures [1, 4, 14, 17, 19, 21]. Other investigations have explored, to some extent, which family member(s) makes the insurance purchase decision. For instance, studies have found that life insurance purchase decisions tend to be husband dominated [ 10, 12, 15]. Childers and Ferrell [6] discovered that in the purchase of auto insurance, the husband was primarily responsible for selecting the company and paying the premium. Additional research has determined that the presence of the wife at the sales interview produced a higher rate of sales [20] and that a family was less likely to buy insurance when the husband and wife discussed the decision in the agent's absence [24]. Although previous empirical work has explored family decision-making responsibility, virtually no published research has examined what characteristics differentiate between families in which the insurance purchase decision is made solely by the husband or entails wife involvement. If such characteristics can be identified, insurance marketers could use these characteristics when tailoring their marketing programs directed at prospective insurance buyers. Thus, additional research is needed to assist insurance marketers in identifying and focusing on the appropriate family decision maker(s). Because of the importance of the topic, a study was designed to complement and extend prior investigations by exploring family decision making for three major kinds of insurance: life, auto, and homeowner. The objective of the research was to identify demographic variables that discriminate between families in which the insurance purchase decision for life, auto, and homeowner insurance is either the husband's sole responsibility or entails wife involvement. The focus was on husband versus wife involvement in insurance-purchasing decisions because Assael [2] has suggested that as more wives enter the labor force, they are likely to have more involvement in many family purchase decisions. In addition, the study examined demographic variables (as opposed to attitudes, for instance) because demographic information is generally available to insurance marketers and their agents.

This study addresses one aspect of the issue regarding the allocation of losses to territorial rating groups. Specifically, the study refutes the proposal that losses should be allocated to a rating group on the basis of its drivers' contribution to congestion and accident frequency rather than the usual method of allocation on the basis of the group's actual loss experience. Further, some of the complexities and inherent errors of a system that allocates losses on the basis of contribution to congestion are explored. In conducting the study, claim data are used in conjunction with two traffic congestion/accident frequency models. Highly congested urban areas generally have larger auto insurance losses per insured than their less congested suburban counterparts. Auto insurance premiums tend to reflect this differential loss pattern by pairing higher priced rating territories with higher loss urban areas. Some critics of the auto insurance industry (notably former Commissioner Stone of Massachusetts) have contended that such pricing is unfair to urban dwellers [ 1]. They have supported their contentions by arguing that accident frequency is affected by congestion and that increased congestion is caused by nonurban drivers commuting into urban areas. The auto insurance industry response to the criticism has been that the pricing mechanism already accounts for the involvement of nonurban drivers in urban accidents. The mechanism which assigns losses to the garaging location of the at-fault vehicles charges nonurban drivers for those accidents they cause in the urban area. This procedure allegedly fails to account adequately for the effect of increased congestion within urban areas. For example, even if two urban drivers collide, the critics contend that the fault (causative factor) is the increased traffic density created by an influx of nonurban cars. The congestion (density) argument has proven to be a difficult criticism for the auto insurance industry to refute using traditional approaches. Moreover, two studies seemingly corroborated the argument [2 and 3]. The study Mark D. Brissman is an Assistant Research Administrator in the Research Department of State Farm Mutual Automobile Insurance Company. He holds B.S. degrees in Mathematics and Biology and an M.S. in Industrial Administration from Purdue University. Mr. Brissman also holds the CPCU designation. The author is indebted to the editor of the Journal, two anonymous Journal referees, and the author's professional colleagues for their assistance in this project.

The use of context-sensitive insurance telematics data in auto insurance rate making

Examining the New Purchase of Whole Life, Endowment and Temporary Insurance through Macro-level Demographic Factors: The Case of Malaysia

This paper analyses the reasons of the differences in the prices of the Italian Motor Third Party Liability (MTPL) insurance with other European countries. It identifies the main reason of the high price level in the evolution of the criteria used by the Judicial system in Italy to quantify the level of compensation due to claimant in case of body injuries. The Italian Courts have not properly taken into account neither the foreign practice nor the direct relationship existing between the level of the compensations and the level of prices. The Judicial system has substituted the political system in defining the level of compensation and by this the amount of resources that the country can devote to MTPL insurance. The paper also describes other reasons for the high level of prices in Italy, focusing mainly on the legislation that is not particularly suited for contrasting insurance frauds. In the final part, the author proposes a set of actions that could reduce the level of MTPL prices in Italy, narrowing the gap with other European countries.

Objective The present studies focused on the role of time perspectives (TPs) and regulatory foci (promotion and prevention) in explaining people’s purchases of car, accident, home, life, and travel insurance. Method Two correlational studies on nationwide Polish samples (N = 1,093 and N = 1,047) were conducted. Results The first study showed that, after controlling for age and sex, higher levels of Future TP and lower levels of Past Negative TP were related to the propensity to make voluntary purchases of car, life, home, and accident insurance. Higher levels of Present Hedonistic TP and lower levels of Present Fatalistic TP were related to the propensity to buy travel insurance. The second study identified significant positive roles of both promotion and prevention regulatory foci in explaining people’s possession of all five types of insurance considered. Conclusions TPs (mainly Future and Past Negative) and regulatory foci (promotion and prevention) seem to be important in explaining people’s insurance-related behaviours. KEY POINTS What is already known about the topic? Insurance decisions are influenced by many psychological variables, e.g., social norms, previous personal experience, emotions and cognitive biases and heuristics Future time oriented individuals focus on future consequences of today decisions and have a greater propensity to save and to invest money Prevention focused individuals try to avoid the negative consequences of unexpected event, so they prefer to invest in financial tools which are characterized by minimal risk What this topic adds? People declaring possession of car, life, home and accident insurance policies were characterized by lower levels of past negative TP and higher levels of future TP than those not possessing such policies Individuals declaring possession of all types of insurance (life, accident, car, home, and travel) were more prevention oriented than those not having such insurance Individuals declaring possession of all types of insurance (life, accident, car, home, and travel) were more promotion oriented than those not having such insurance

Auto insurance rates can vary dramatically, with much higher premiums in poor and minority areas than elsewhere, even after accounting for individual characteristics, driving history, and coverage. This paper uses a unique data set to examine the relative influence of place‐based socioeconomic characteristics (or redlining) and place‐based risk factors on the place‐based component of automobile insurance premiums. We use a novel approach of combining tract‐level census data and car insurance rate quotes from multiple companies for sub‐areas within the city of Los Angeles. The quotes are for a hypothetical individual with identical demographic and auto characteristics, driving records, and insurance coverage. This method allows the individual demographic and driving record to be fixed. Multivariate models are then used to estimate the independent contributions of these risk and redlining factors to the place‐based component of the car insurance premium. We find that both risk and redlining factors are associated with variations in insurance costs in the place‐based component, with black and poor neighborhoods being adversely affected, although risk factors are stronger predictors. However, even after risk factors are taken into account in the model specification, SES factors remain statistically significant. Moreover, simulations show that redlining factors explain more of the gap in auto insurance premiums between black (and Latino) and white neighborhoods and between poor and nonpoor neighborhoods. The findings do not appear sensitive to the individual characteristics of the hypothetical driver. © 2007 by the Association for Public Policy Analysis and Management

This paper examines the extent to which shifts in cost rankings occur between annual premium-based interest-adjusted cost indices and indices based on premiums payable more frequently than annually. The N.A.I.C. Model Solicitation Regulation and all published data use annual premiums as the basis for all calculations. Yet fewer than one in five purchasers of life insurance pay premiums annually. Thus, manipulation of annual premium-based cost figures is theoretically possible. The National Association of Insurance Commissioner's (N.A.I.C.) Life Insurance Solicitation Model Regulation and the laws of the states having any form of life insurance cost disclosure, require the consumer be given, on request or automatically, interest-adjusted cost and other information [ 13, pp. 545-552]. The Federal Trade Commission staff report also would require disclosure of life insurance costs, but based on the 20-year surrender index and Linton's rate of return pricing method [9, pp. 99-100, 153]. All the above require that costs be calculated using annual premiums. Moreover, all published data on life insurance costs use annual premiums as the basis for all calculations. Yet, as Table 1 shows, most purchasers of life insurance do not pay premiums on an annual basis. In fact, fewer than one in five currently pay premiums annually. Insurers differ in the assumptions they make in computing premiums payable more frequently than annually (hereafter called non-annual premiums) [3, pp. 152-154]. It is possible, therefore, for an insurer to illustrate a competitive cost based on annual premium payments but, by using conservative assumptions to compute more frequent premium payments, to have a high net cost if the policyowner chooses to pay premiums monthly, quarterly, or semi-annually. This paper examines a segment of the life insurance business to determine whether and to what extent shifts in cost rankings occur between interestadjusted cost indices calculated on an annual premium basis and cost indices

Buckle Up: The Long, Winding Road to Improved Auto Insurance Premiums in Louisiana

: The Alliance to Revitalize California, a private, non- profit organization, has proposed a no-fault automobile insurance plan for California (Coalition for Common Sense, November 1994). The California Department of Insurance asked the Institute for Civil Justice to analyze the effects of the proposed plan on automobile insurance costs in California. We used a database we had developed in the course of a previous study to estimate the effects of the proposal and published our findings last March. The database we used in that study described the compensation provided a random sample of California auto accident victims in 1987. Recently we obtained comparable data for a random sample of Californians who were compensated for auto accident injuries in 1992. Using these more recent data, we replicated our earlier analysis. Our analysis of the 1992 data suggests that the proposed plan would result in substantial savings on insurance costs. In brief, we find that the proposed plan would reduce the costs of compensating auto accident victims for personal injuries by 21 to 54 percent compared to California's current auto insurance system. If the premium an insurer charges for a policy varies in proportion to the compensation costs it can expect to incur on behalf of the policyholder, the plan would result in a reduction of 11 to 29 percent in the average California driver's auto insurance premiums.

INTRODUCTION Despite the proliferation of research on the relationship between concentration and profitability in many industries,(1) the existence of such a relationship in the property and liability insurance sector has not received much attention in the literature. Carroll (1993) examines this issue for the workers compensation market and is unable to find the positive relationship that is predicted by industrial organization theory. Since automobile insurance is the largest source of income for property-liability insurers(2) and competition in consumer markets tends to be local, concentration may be a more significant factor in pricing for this line than it is for workers' compensation. Although many companies sell automobile insurance, most are affiliated with larger groups of insurers and a fairly small number of companies control a large share of the business in the United States, with more concentration in certain states.(3) Under these circumstances, market structure may play a greater role in the pricing of private passenger auto insurance. The auto insurance industry has been under fire in the last two decades and has been accused of making excessive profits by colluding to restrict supply and keep prices artificially high. The passage of Proposition 103 in the state of California demonstrates that such beliefs may be widely held and can have dramatic consequences. Legislative proposals at the federal level, intended to repeal the antitrust exemption for insurers under the McCarran Ferguson Act, can also be attributed to this type of consumer attitude. Although the last decade has been a period of rising auto insurance premiums, particularly in certain geographical areas, the industry has consistently argued that higher prices are the result of rising costs, and that profit margins are slim.(4) This argument apparently won judicial support in California where the voter-approved twenty percent rollback of premiums was halted based on evidence that such a reduction would imply negative profits for many insurers. The purpose of this study is to investigate the relationship between profitability and concentration in the United States private-passenger automobile insurance industry. Since antitrust regulation is based on the assumption that concentration promotes collusive behavior, the results of this study should prove valuable to policy-makers, industry professionals and, ultimately, to consumers as well. The next section of the paper details the theoretical background and reviews previous empirical studies. The third section presents the data and methodology followed by a summary of the empirical results. Conclusions and policy implications are provided in the final section of the paper. BACKGROUND The industrial organization literature provides two competing hypotheses for the relationship that exists between performance and concentration. The structure-conduct-performance paradigm (SCP) suggests that market share concentration creates conditions for collusive anti-competitive behavior that can lead to monopoly profits. The SCP paradigm therefore predicts a positive relationship between profitability and market concentration level. The efficient structure (ES) hypothesis offers an alternative explanation for the positive relationship between profit and concentration. First proposed by Demsetz (1973), the ES hypothesis suggests that firms with superior efficiency (lower costs) will gain a larger market share. Thus, if larger firms have a comparative advantage in production or services provided, they may achieve higher profits without resorting to collusive measures such as raising prices or restricting supply. From a public policy standpoint, the SCP paradigm and the ES hypothesis have conflicting implications for industrial regulation. The first provides justification for strict antitrust regulation and the latter would imply that an unrestricted marketplace would result in the lowest prices to consumers. …

Should life insurance companies have access to consumers’ genetic information? In deciding whether to sell life insurance policies and at what price, insurers routinely consider applicants’ risk factors, such as smoking and obesity. Should genetic information be excluded? The Genetic Information Nondiscrimination Act (GINA) bars use of genetic information for health insurance underwriting decisions, but not for life, long-term care, or disability insurance. These questions have received occasional attention in the past but have become more salient with the rapidly decreasing cost and increasing use of predictive genetic testing. Individuals at risk for serious genetic diseases may fear loss of insurance coverage or higher rates and thus decline genetic testing that could improve disease prevention, early diagnosis, or treatment.

Characterized by its large potential and high growth rate, the life insurance industry has been one of the most dynamic sectors, which is playing an increasingly important role in India's liberalized economy. Since the opening up of the insurance sector for private participation in 2001, there are already 23 private sector life insurance companies with foreign tie-ups operating in India's life insurance market, along with the public sector giant, Life Insurance Corporation (IRDA Annual Report 2010-11). However, traditionally, life insurance has always been an unsought product in India. These private life insurance companies have found that their market penetration processes are not as smooth as they expected. Without understanding the distinctive insurance investment environment in India and the insurance buyers' perception towards private life insurance, in particular, the private players are going to face many problems on the way to their goals. The present study attempted to ascertain the significant perceptions of insurance buyers in Karnataka towards private life insurance. Various statistical tools were used to arrive at concrete findings based on which suggestions are offered.

Credit Crunch and Insurance Consumption: The Aftermath of the Subprime Mortgage Crisis

PurposeLife insurance is a kind of long-term investment; hence, the purpose of buying life insurance is to cover both current and future damages for the insured. Although insurance plays a crucial rule in fiscal and economic development, in MENA countries, insurance, especially life insurance, remains undeveloped, with a low penetration rate. Therefore, the purpose of this paper is to determine the factors that affect life insurance demand.Design/methodology/approachTo analyze the determinants of life insurance demand during 2004-2012, a panel data model was estimated with Eviews software. Data on population, gross domestic product (GDP), interest rate, inflation rate, and human development index are extracted from the World Bank, and data on life insurance premium are gathered from Sigma International reports.FindingsResults show that the price elasticity of life insurance demand is −0.77, the elasticity of life insurance subject to HDI is 1.68, the elasticity of life insurance subject to GDP is 0.92, and the elasticity of life insurance subject to interest rate is −0.33. The demand for life insurance has a positive significant relationship with population size.Research limitations/implicationsThe low elasticity of life insurance demand subject to GDP, interest rate, and inflation rate shows that the life insurance penetration rate in MENA countries is due to the dominance of compulsory insurance, and not due to voluntary purchasing of life insurance. The higher effect of HDI on the life insurance demand illustrates that, for developing the life insurance market, it is first necessary to improve the standard of life, education status, and the economic base.Originality/valueAs in the MENA region life insurance has remained undeveloped and there are no related studies in this area, it can be hypothesized that the life insurance penetration rate in MENA is due to the dominance of compulsory insurance and not due to voluntary purchasing of life insurance. The higher effect of HDI on life insurance demand illustrates that, for developing the life insurance market, it is first necessary to improve the standard of life, education status, and economic base.