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Incentive Mechanisms for Safe Driving: A Comparative Analysis with Dynamic Data

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Author Info

  • Georges Dionne

    (HEC Montréal)

  • Jean Pinquet

    (Université Paris Ouest-‐Nanterre and Ecole Polytechnique)

  • Mathieu Maurice

    (HEC Montréal)

  • Charles Vanasse

    (TD Asset Management)

Abstract

Road safety policies often use incentive mechanisms based on traffic violations to promote safe driving-—for example, fines, experience rating, and point-record driver's licenses. We analyze the effectiveness of these mechanisms in promoting safe driving. We derive their theoretical properties with respect to contract time and accumulated demerit points. These properties are tested empirically with data from the Quebec public insurance plan. We find evidence of moral hazard, which means that drivers who accumulate demerit points become more careful because they are at risk of losing their license. An insurance rating scheme introduced in 1992 reduced the frequency of traffic violations by 15%%. We use this result to derive monetary equivalents for traffic violations and license suspensions. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 93 (2011)
Issue (Month): 1 (February)
Pages: 218-227

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Handle: RePEc:tpr:restat:v:93:y:2011:i:1:p:218-227

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Cited by:
  1. Antonio Nicita & Simona Benedettini, 2012. "The Costs of Avoiding Accidents.Selective Compliance and the 'Peltzman Effect' in Italy," Department of Economics University of Siena 631, Department of Economics, University of Siena.
  2. Marcello Basili & Filippo Belloc & Simona Benedettini & Antonio Nicita, 2012. "Warning, Learning and Compliance: Evidence from Micro-data on Driving Behavior," Department of Economics University of Siena 639, Department of Economics, University of Siena.
  3. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
  4. Heni Boubaker & Nadia Sghaier, 2014. "How Do the Interest Rate and the Inflation Rate Affect the Non-Life Insurance Premiums ?," Working Papers 2014-282, Department of Research, Ipag Business School.
  5. Benedettini, Simona & Nicita, Antonio, 2012. "The costs of avoiding accidents: Selective compliance and the ‘Peltzman effect’ in Italy," International Review of Law and Economics, Elsevier, vol. 32(2), pages 256-270.
  6. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
  7. Jean Pinquet, 2012. "Experience rating in non-life insurance," Working Papers hal-00677100, HAL.
  8. Chandler, Vincent, 2012. "Assessing the Impact of Deterrence on Road Safety due to the Demerit Point System," MPRA Paper 39439, University Library of Munich, Germany.
  9. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.

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