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

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  • Jean Pinquet

    () (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

  • Georges Dionne

    (HEC Montréal - HEC MONTRÉAL)

  • Charles Vanasse

    (HEC Montréal - HEC MONTRÉAL)

  • Maurice Mathieu

    (HEC Montréal - HEC MONTRÉAL)

Abstract

Road safety policies often use incentive mechanisms based on traffic violations to promote safe driving. Examples of mechanisms are fines, experience rating and point-record driving licenses. We analyse 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 threat of losing their license. The 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.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00567866.

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Date of creation: Feb 2011
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Publication status: Published, The Review of Economics and Statistics, 2011, 93, 1, 218-227
Handle: RePEc:hal:journl:hal-00567866

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00567866/en/
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Cited by:
  1. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
  2. 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.
  3. 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.
  4. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
  5. Georges Dionnne & Pierre-Carl Michaud & Jean Pinquet, 2012. "A Review of Recent Theoretical and Empirical Analyses of Asymmetric Information in Road Safety and Automobile Insurance," Cahiers de recherche 1204, CIRPEE.
  6. 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.
  7. Jean Pinquet, 2012. "Experience rating in non-life insurance," Working Papers hal-00677100, HAL.

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