Estimating the Effect of a Change in Insurance Pricing Regime on Accidents with Endogenous Mobility
21 Pages Posted: 3 Oct 2007
Date Written: September 24, 2007
In this paper, we estimate the impact of introducing a bonus-malus system on the probability of having automobile accidents, taking into account contract duration or the client mobility between insurers. We show that the new incentive scheme reduces accident rates of all policyholders when contract duration is taken into account, but does not affect accident rates of movers that shirk the imposed incentive effects of the new insurance pricing scheme.
Keywords: Bonus-malus, contract duration, automobile accident, Poisson distribution, right- and left-censoring, exponential distribution
JEL Classification: J22, J29, C23
Suggested Citation: Suggested Citation