Pay-as-you-speed: Two field experiments on controlling adverse selection and moral hazard in traffic insurance
AbstractAround one million people are killed world wide every year in road-traffic accidents. The risks and consequences of accidents increase progressively with speed, which ultimately is determined by the individual driver. The behaviour of the motorist thus affects both her own and other peoples safety. Internalisation of external costs of road transport has hitherto been focused on distance-based taxes or insurance premiums. While these means, as they are designed today, may affect driven distance, they have no influence on driving behaviour. This paper argues that by linking on-board positioning systems to insurance premiums it is possible to reward careful driving and get drivers to self select into different risk categories depending on their compliance to speed limits. We report two economic field experiments that have tested ways to induce car-owners to have technical platforms installed in their vehicle in order to affect the extent of speeding. It is demonstrated that a bonus to remunerate those that have the device installed, tantamount to a lower insurance premium, increases drivers?propensity to accept the technical devices. In a second experiment the size of the bonus is made dependent on the actual frequency of speeding. We find that this is a second way to discipline users to drive at legal speeds.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Field Experiments Website in its series Framed Field Experiments with number 00170.
Date of creation: 2005
Date of revision:
Contact details of provider:
Web page: http://www.fieldexperiments.com
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hultkrantz, Lars, 2004. "Voluntary road pricing," Working Papers 2004:5, Örebro University, School of Business.
- Glenn Harrison & John List, 2004.
Artefactual Field Experiments
00058, The Field Experiments Website.
- Daniel H. Klepinger & Terry R. Johnson & Jutta M. Joesch, 2002. "Effects of unemployment insurance work-search requirements: The Maryland experiment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 3-22, October.
- Royalty, Anne Beeson & Hagens, John, 2005. "The effect of premiums on the decision to participate in health insurance and other fringe benefits offered by the employer: evidence from a real-world experiment," Journal of Health Economics, Elsevier, vol. 24(1), pages 95-112, January.
- Parry, Ian, 2003.
"Comparing Alternative Policies to Reduce Traffic Accidents,"
dp-03-07, Resources For the Future.
- Parry, Ian W. H., 2004. "Comparing alternative policies to reduce traffic accidents," Journal of Urban Economics, Elsevier, vol. 56(2), pages 346-368, September.
- Steven D. Levitt & John A. List, 2008.
"Field Experiments in Economics: The Past, The Present, and The Future,"
NBER Working Papers
14356, National Bureau of Economic Research, Inc.
- Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
- Steven Levitt & John List, 2009. "Field experiments in economics: The past, the present, and the future," Artefactual Field Experiments 00079, The Field Experiments Website.
- Arvidsson, Sara, 2010. "Reducing asymmetric information with usage-based automobile insurance," Working Papers 2010:2, Swedish National Road & Transport Research Institute (VTI), revised 03 Feb 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joe Seidel).
If references are entirely missing, you can add them using this form.