Automobile Insurance Market Research Articles

Cream Skimming and Technological Innovations in Automobile Insurance Market

Abstract This study examines the effect of telematics devices on the automobile insurance market. Automobile insurance using these devices is marketed as pay-how-you-drive (PHYD) automobile insurance. Insurers can directly monitor the insured’s vehicle for risky driving behaviors such as speeding. Some of insureds receive discounts on their premiums for driving more cautiously. On the other hand, accumulating the insured’s driving skills, insurers may be able to only sign up insureds with low accident rates, widely known as cream skimming. By applying Hodgson (2014. “Adverse Selection in Health Insurance Markets: A Classroom Experiment.” The Journal of Economic Education 45 (2): 90–100), we tested whether PHYD programs makes it easier for insurers to contract with low-risk drivers. Repeated cream skimming suggests that only high-risk drivers remain in the market and a residual market cannot be established, which could lead to adverse selection and market failure in the absence of any regulations. However, the experiment revealed that low-risk but highly risk-averse subjects tend to dislike the fluctuation in premiums by enrolling in PHYD programs. The results could be effective in future regulatory construction.

Modeling claims frequency in the Algerian automobile insurance market using machine learning

The Algerian automobile insurance market faces significant challenges in pricing insurance policies due to the lack of reliable predictions for insurance losses. In this paper, we introduce a new ratemaking system that leverages advanced data analysis techniques, including Generalized Linear Models and machine learning algorithms like Neural Networks, boosting, and stacking algorithms, to model claims frequency. By analyzing data and statistics of drivers in the Algerian market, this system offers a data-driven solution that helps insurers to better understand their risk exposure and make informed pricing decisions. The proposed system has implications for both insurers and policyholders in terms of fairer and more accurate pricing, which will ultimately benefit the Algerian economy.

Antecedents of hidden action problems in the Egyptian automobile insurance market: buyer-supplier relationship perspective

Antecedents of hidden action problems in the Egyptian automobile insurance market: buyer-supplier relationship perspective

Innovations in analytics as a marketing tool, as an example of car insurance

The article is devoted to the study of the current state and trends in the development of innovations in analytics as a marketing tool in the context of global digitalization. The development of digital technologies allows companies to use more opportunities to conduct their activities, improve their products and offers. Significant interest in innovations in analytics is revealed by high scientific interest in this topic among researchers. The current state of the car insurance market, the influence of analytical innovations in marketing on the processes of market functioning, products and offers of companies are considered. The main areas of digitization of the industry were identified: the implementation and use of Big Data for risk reduction and detailed study of service consumers, monitoring of the actual use of insurer services by customers using IoT devices and the help of artificial intelligence for data processing and ideas for implementing changes. A detailed description of the essence of each of these innovations is given and the practical use of some of these methods of digitization of the industry by foreign and Ukrainian companies is indicated. The activities of the best examples of the use of Big Data, IoT technologies, work with artificial intelligence by the world's leading insurers and compared with the current set of innovative, analytical tools used by Ukrainian companies are considered. It has been studied that foreign insurers use more innovative measures in analytics than Ukrainian ones. The strengths and weaknesses of insurtech innovations in analytics, in the field of auto insurance, are determined. Taking into account the conducted analysis, practical recommendations are provided regarding possible ways to expand innovation methods for use by Ukrainian insurance companies, possible options for cooperation with enterprises of other fields are determined for a more detailed market analysis and study of consumer requests. As a result of applying the recommendations presented in the work, Ukrainian insurers will be able to better analyze potential and existing customers, reduce possible risks, adapt their products to the received data and personalize, improve offers, which will help to be competitive in the market.

The Necessity and Feasibility of Usage-Based Insurance for New Energy Vehicles in China

Aims: With the continuous development and growth of China's new energy automobile market, new automobile owners desire exclusive auto insurance. However, most insurance companies use traditional automobile commercial auto insurance to cover them. Under this pricing model, there is little overall difference in premiums, regardless of whether the driver's driving behavior is good or not. This paper wants to implement usage-based insurance (UBI) in China because it can add more auxiliary pricing factors, adjust according to the driver's driving behavior changes, and make auto insurance pricing more scientific and fair.
 Study Design: This paper employs the literature review and market research methods to analyze the current product supply and consumer demand in the Chinese auto insurance market. Firstly, introduce the current situation of the development of the new energy automobile insurance market in China and its problems. Then, discuss the necessity and feasibility of developing UBI auto insurance for new energy vehicles in China. Finally, based on the reality of China's new energy vehicle UBI auto insurance gives some programs.
 Conclusion: This paper finds that from the perspective of insurance companies, consumers, and the social level, UBI auto insurance for new energy automobiles is necessary, and it is also the direction of future auto insurance reform and development. Subsequently, combined with China's current relevant policies and technologies, it is concluded that the development of UBI auto insurance for new energy vehicles in China is feasible.

The Guarantee Pricing and the Analysis of the Automotive Branch Insurance Profitability in Tunisia

The presented study thoroughly investigates the technical profitability of the Tunisian automobile insurance market using a quantitative research approach with interpretivism as its foundation. The study aims to offer insightful information about the dynamics and profitability of the sector by concentrating on the combined ratio and applying the S/P ratio calculation. The data show that the Tunisian auto insurance industry faces serious obstacles. The S/P ratios continually exceeded 100% from 2019 to 2021, indicating a chronic problem of low technical profitability. Notably, the civil responsibility guarantees considerably added to this imbalance, particularly in the “agricultural utility” and “2-wheel use” categories, with S/P ratios rising to frightening heights, like 937% in 2012. These findings highlight the pressing necessity for pricing modifications and a thorough comprehension of the nuances of the market. The Tunisian auto insurance industry must address underpricing concerns and increase overall profitability viable over the long run. This study offers helpful insights for policymakers and business experts trying to manage these difficult issues and promote a more vibrant insurance market.

Implementation of innovative information technologies in the insurance market in Russia: telematics in auto insurance

To consider the main stages and problems of the introduction of telematics in the insurance industry, to identify the importance and prospects for the development of telematics in motor insurance in Russia.Tasks. To investigate telematics models in auto insurance; to identify problems affecting the introduction of telematics in the insurance business; to analyze the state of the car insurance market in Russia and the experience of foreign countries in the introduction of telematics; to analyze the attitude of policyholders to telematics in auto insurance.The study was conducted using general scientific and private scientific methods, a formal–logical approach, as well as a survey of policyholders.Results. In Russia, the use of insurance telematics technologies is at an early stage. Insurers need to be prepared to work with huge amounts of information, have specialized software and a powerful back office. All this requires significant investment in development and operation. The state of the auto insurance market and the experience of foreign countries in the implementation of telematics are analyzed. The necessity of using insurance telematics as a new level of cooperation with clients is proved based on an in–depth analysis of scientific works, a survey of insurers and the market situation.Conclusions. It has been established that telematic devices make it possible to determine the cost of an insurance policy, reduce the losses of an insurance company by creating personal insurance products, increase the level of service and, in general, reduce cases of insurance fraud more accurately.

Cream Skimming and Technological Innovations in Automobile Insurance Market

Cream Skimming and Technological Innovations in Automobile Insurance Market

Страхування відповідальності власників транспортних засобів в Україні в контексті євроінтеграції та страхового менеджменту

Mandatory civil liability insurance for owners of land vehicles in Ukraine provides social protection for road accident participants and contributes to European integration processes. The purpose of the research is to analyze the current condition of the car liability insurance market in Ukraine, identify problems and substantiate practical recommendations for improving insurance management, taking into account European integration processes. The mandatory liability insurance for owners of land vehicles in Ukraine was systematized. The structure of the car insurance portfolio of insurance companies in Ukraine was analyzed. The impact of war and quarantine on the structure of the insurance portfolio and the level of digitization of the car insurance market in Ukraine is substantiated. The main indicators of the market of mandatory liability insurance for land vehicles owners in Ukraine are analyzed. The necessity to increase the size of insurance sums to European standards is substantiated. The recommendations regarding the use of the direct losses compensation system for all participants in the market of mandatory liability insurance for owners of ground vehicles under internal contracts are given. Proposals to improve the quality of liability insurance under an internal agreement by introducing non-cash payments with private individuals when paying compensation and changing the procedure for calculating the cost of repairing cars when damage is established are substantiated.

Antecedents of Hidden Action Problems in the Egyptian Automobile Insurance Market: Buyer-Supplier Relationship Perspective

Antecedents of Hidden Action Problems in the Egyptian Automobile Insurance Market: Buyer-Supplier Relationship Perspective

Erie Insurance: Monitoring technology in the car insurance market and the issue of data privacy

The influence of big data affects all aspects of life, including insurance. With car insurance, companies have the ability to go beyond the traditional driving history and current usage questions to customize policies for each holder, especially with the introduction of monitoring technology that is either installed directly into the car or accessed via cell phone. Most consumers who are interested in usage-based insurance coverage are willing to sacrifice any concerns with data security for the trade off of financial savings, but car insurance companies must be aware of the ethics of their actions and work to protect user data. Erie Insurance Company is specifically analyzed in this article as an example.

Price Subsidies and the Demand for Automobile Insurance

This article tests for regulation-induced adverse selection in the Massachusetts automobile insurance market during the 1990–2004 period of fix-and-establish rate regulation. We demonstrate the application of the test for adverse selection in Finkelstein and Poterba (Journal of Risk and Insurance 81 (4):709–34, 2014) to a regulated insurance market using group-level panel data on purchase amounts and loss costs. Differences between rates that incorporate state-mandated restrictions and those based on actuarial estimates provide a proxy for the unused observables needed to implement the test. Consistent with regulation-induced adverse selection, proxy values indicating higher unpriced risk are statistically significant and positively related to both insurance purchases and loss costs.

Customer motivation and satisfaction related to purchases of comprehensive car insurance in Poland

Complexity and unequal access to information for all parties involved are among the key characteristics of the market of comprehensive car insurance in Poland. This paper presents the results of a research project1 aimed at investigating consumer motivation and satisfaction related to purchases of comprehensive car insurance policies. Qualitative studies (IDIs) delivered in-depth information about relations between different parties and potential issues that were scrutinized in the quantitative part of the study. A binary logit model based on replies to a CATI survey of a representative sample of 4,500 respondents helped the researchers to identify certain reasons of purchases of this type of insurance. A further analysis proved that the level of consumer satisfaction was, in fact, greater than that the authors had originally anticipated based on the level of consumer confidence in the insurance industry, which is discussed further in this paper. The authors relied on official statistics on the Polish car insurance market and data showing the age-based breakdown of motor vehicles in different geographical areas to present some tendencies and pinpoint specific factors affecting customer motivation and satisfaction related to purchases of comprehensive car insurance.

Competitiveness and Asymmetric Information Evidence from China's Automobile Insurance Market

Competitiveness and Asymmetric Information Evidence from China's Automobile Insurance Market

Impact of Automated Driving Technology on Japanese Automobile Insurance Market

Purpose: This study attempts to predict the scale of the Japanese automobile insurance market. The forecast is based on the understanding of safety technologies and historic market trends. Research design, data, and methodology: Automobile insurance, together with compulsory automobile liability insurance (CALI), holds more than 50% of the total premium in the Japanese non-life insurance industry. If automated driving prevails, automobile accidents would likely decrease rapidly. Even if fully automated driving does not occur in the near future, some of its elemental technologies, especially collision damage mitigation braking, will significantly reduce the incidence of automobile accidents, and thus the market for automobile insurance. Moreover, as the country’s population decreases, the number of automobiles owned and licenses issued will reduce. We made 20-year predictions of the automobile insurance market in Japan. The calculation is based on demographic data, penetration of safety devices, and their accident prevention effects on bodily injury and property damage. Data are gathered from Japanese governmental statistics, insurance statistics, and research institutes. Results: Our prediction indicates that in the medium-term, the Japanese automobile insurance market will remain stable, and the reduction in the frequency of accidents may proceed slowly and will be mostly offset by the increasing amount of claims per accident. Although we do not have a quantitative estimation for the long term, it may fall drastically after the onset of fully automated driving. Implications: The challenge for insurers in the medium term will be to adapt to the transitional period of declining automobile accidents. In the long term, the weight of lines will shift from automobile insurance to new types of insurance, and insurers will need to implement various structural changes to adapt to this change.

Impact of Automated Driving Technology on Japanese Automobile Insurance Market

Impact of Automated Driving Technology on Japanese Automobile Insurance Market

Deregulation, competition, and consumer choice of insurer: Evidence from liberalization reform in China’s automobile insurance market

Deregulation, competition, and consumer choice of insurer: Evidence from liberalization reform in China’s automobile insurance market

Information asymmetry, ex ante moral hazard, and uninsurable risk in liability coverage: Evidence from China's automobile insurance market

AbstractWe make use of a unique data set to test for information asymmetry, as well as distinguish ex ante moral hazard from adverse selection in different types of third‐party liability claims in automobile insurance policies: that is, those with bodily injury (BI) versus those with only property damage (PD). We find that the degree of information asymmetry is higher in liability claims with BI than those with only PD. Yet, the ex ante moral hazard only exists in liability claims with PD. We use a theoretical model to propose that the difference we find between the two types of claims in ex ante moral hazard is related to uninsurable risk embedded in BI claims. We confirm this finding in another sensitivity test comparing claims from new cars and nonnew cars. Altogether, these results suggest policy reforms leading to a better pricing mechanism in the automobile insurance industry in China.

CURRENT TRENDS OF AUTOTRANSPORT INSURANCE IN UKRAINE

The research of the article is aimed at highlighting the essence and features of the functioning of the car insurance market in Ukraine. The study found that motor insurance is associated with profound economic and social changes in society due to mass motorization, the growth of the car fleet and traffic intensity, as well as huge material losses as a result of road accidents. It should be noted that freight transport is developing quite rapidly both within the country and abroad. At the same time, an increase in the number of intercity bus transportation, excursion and tourist bus services has been established, and as a result, international motor tourism is growing. It is proved that these factors contribute to the growth of accidents, losses in the transportation of goods, increase accidents with passengers and pedestrians on highways and, accordingly, material and social losses of society, population, commercial and government agencies. It is substantiated that insurance in general and civil liability insurance, as its integral part, is an infrastructure that helps to increase the efficiency of all areas of business. This determines the importance of the development of all types of insurance in Ukraine, taking into account the process of integration into the world community. It is established that the development of insurance market in our country should be based on the study and balanced use of experience of industrialized countries with long traditions in the insurance market, legal regulation of insurers and diversification of various types of insurance. However, it should be borne in mind that the world community has invented universal means of compensation, which is the most popular type of liability insurance worldwide – is the insurance of civil liability of owners of land vehicles. It provides for the payment of monetary compensation to the victim in the amount that would be collected from the owner of the vehicle on a civil lawsuit in favor of a third party for damage to life and health, as well as for damage or loss of property due to an accident or other road – transport accident due to the fault of the insured. Given the state and prospects of motorization in our country, as well as foreign experience in insurance market, we can say with confidence that liability insurance is one of the leading areas among other types of insurance. However, in its organization and implementation there are many different problems of legal, social, economic and organizational type. Recommendations on the prospects for the development of civil liability insurance of owners of land vehicles in Ukraine are given.

Price Subsidies and the Demand for Automobile Insurance

This paper tests for regulation-induced adverse selection in the Massachusetts automobile insurance market during the regulated period 1990-2005. The paper demonstrates the application of the Poterba-Finkelstein (2014) unused-observables test for adverse selection in a regulated insurance market using group-level panel data. Differences between rates that incorporate state-mandated restrictions and those based on actuarial estimates provide data on the unused-observables needed for the test. Consistent with regulation-induced adverse selection, unused observables are statistically significant and positive in estimated models of both insurance purchases and loss costs. Robustness checks support the inference that higher-risk drivers account for the results.