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Privacy, Driving Data and Automobile Insurance: An Economic Analysis

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  • Hollis, Aidan
  • Strauss, Jason

Abstract

With new technologies that enable insurers to electronically monitor vehicles and drivers, insurers should be able to price automobile insurance more accurately, creating individualized prices for consumers. The welfare effects of lower prices are straightforward, but we also consider that consumers have heterogeneous valuations of privacy that they may lose if they adopt the monitoring technologies. We examine the voluntary market adoption of these monitoring technologies and its effect on equilibrium prices and welfare. We find a welfare effect equal to the loss in privacy, but conclude that the overall effect is ambiguous without considering moral hazard.

Suggested Citation

  • Hollis, Aidan & Strauss, Jason, 2007. "Privacy, Driving Data and Automobile Insurance: An Economic Analysis," MPRA Paper 11091, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:11091
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    References listed on IDEAS

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    1. Lilia Filipova & Peter Welzel, 2005. "Reducing Asymmetric Information in Insurance Markets: Cars with Black Boxes," Discussion Paper Series 270, Universitaet Augsburg, Institute for Economics.
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    7. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
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    Cited by:

    1. Adam Śliwiński & Łukasz Kuryłowicz, 2021. "Usage‐based insurance and its acceptance: An empirical approach," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(1), pages 71-91, March.
    2. Gemmo, Irina & Browne, Mark J. & Gründl, Helmut, 2017. "Transparency aversion and insurance market equilibria," ICIR Working Paper Series 25/17, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    3. Emer Owens & Barry Sheehan & Martin Mullins & Martin Cunneen & Juliane Ressel & German Castignani, 2022. "Explainable Artificial Intelligence (XAI) in Insurance," Risks, MDPI, vol. 10(12), pages 1-50, December.
    4. Adam Sliwinski & Lukasz Kurylowicz, 2021. "The Value of Privacy - Empirical Research, Using Drivers as an Example," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 936-953.

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    More about this item

    Keywords

    Insurance; Privacy;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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