Asymmetric Information in Automobile Insurance: Evidence from Driving Behavior

38 Pages Posted: 12 Oct 2016 Last revised: 5 Dec 2018

See all articles by Alois Geyer

Alois Geyer

VGSF / WU

Daniela Kremslehner

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics

Alexander Muermann

WU (Vienna University of Economics and Business); Vienna Graduate School of Finance (VGSF)

Multiple version iconThere are 2 versions of this paper

Date Written: December 3, 2018

Abstract

Based on a unique data set of driving behavior we test whether private information in driving characteristics has significant effects on contract choice and risk in automobile insurance. We define a driving-factor based on overall distance driven, number of car rides, and speeding. Using local weather conditions, we account for the endogeneity of the driving-factor. While this driving-factor has an effect on risk, there is no significant evidence for selection effects in the level of third-party liability and first-party insurance coverage.

Keywords: private information, automobile insurance, driving behavior, telematic data, pay-as-you-drive insurance, endogeneity, sample selection

Suggested Citation

Geyer, Alois and Kremslehner, Daniela and Muermann, Alexander, Asymmetric Information in Automobile Insurance: Evidence from Driving Behavior (December 3, 2018). CFS Working Paper, No. 543. Available at SSRN: https://ssrn.com/abstract=2850537 or http://dx.doi.org/10.2139/ssrn.2850537

Alois Geyer

VGSF / WU ( email )

Welthandelsplatz 1
Institute for Financial Research
Vienna, 1020
Austria

HOME PAGE: http://www.wu.ac.at/~geyer

Daniela Kremslehner

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Alexander Muermann (Contact Author)

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
A - 1020 Wien
Austria
+43 1 31336 4948 (Phone)
+43 1 31336 90 4948 (Fax)

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
A - 1020 Wien
Austria

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