Can Vehicle Maintenance Records Predict Automobile Accidents?

18 Pages Posted: 24 May 2012

See all articles by Shyi‐Tarn Bair

Shyi‐Tarn Bair

affiliation not provided to SSRN

Rachel J. Huang

National Central University at Taiwan - Department of Finance; Graduate Institute of Finance, NTUST

Kili C. Wang

Tamkang University

Date Written: June 2012

Abstract

This article proposes that vehicle maintenance records can provide useful information for predicting the probability that an owner will have an automobile accident. To test the hypothesis, we use a unique data set that is merged from an insurance company and a vehicle manufacturer in Taiwan. We find weak evidence to support our hypothesis. Among all the proxies for proper maintenance, we indicate that proper maintenance defined by the recommended kilometers is significantly negatively correlated with the loss probability in compulsory automobile liability insurance. The average loss probability decreases by 0.23 percent when the insured vehicle is properly maintained according to the recommended number of kilometers in the previous years, whereas the average loss probability for the overall sample is 0.49 percent. We further find that proper maintenance is insignificantly correlated with loss severity.

Suggested Citation

Bair, Shyi‐Tarn and Huang, Rachel J. and Wang, Kili C., Can Vehicle Maintenance Records Predict Automobile Accidents? (June 2012). Journal of Risk and Insurance, Vol. 79, Issue 2, pp. 567-584, 2012. Available at SSRN: https://ssrn.com/abstract=2065687 or http://dx.doi.org/10.1111/j.1539-6975.2011.01433.x

Shyi‐Tarn Bair (Contact Author)

affiliation not provided to SSRN

No Address Available

Rachel J. Huang

National Central University at Taiwan - Department of Finance ( email )

No. 300, Jhongda Rd, Jhogli City, Taoyuan, Taiwan,
Jhongli, TY 32001
Taiwan

Graduate Institute of Finance, NTUST ( email )

#43,Sec.4
Keelung Rd
Taipei, Taipei 106
Taiwan

Kili C. Wang

Tamkang University ( email )

No.151, Yingzhuan Rd
Taiwan, Taipei Hsien 25137
China

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