Abstract
Most Asian countries have adopted bonus-malus systems (BMS) in automobile insurance. We evaluate the toughness towards consumers of 16 Asian BMS and its correlation with cultural and economic variables. We use principal components analysis to define a Maturity Index of insurance markets and find supporting evidence for a conjecture that, as markets become more mature and policy-holders more sophisticated, countries adopt tougher BMS. In addition, we find, using regression analysis, that using a Common Law legal system is a crucial factor in BMS design. Cultural variables, such as uncertainty avoidance, also influence BMS.
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