Privacy, Driving Data and Automobile Insurance: An Economic Analysis
AbstractWith 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11091.
Date of creation: 16 Nov 2007
Date of revision:
Other versions of this item:
- Aidan Hollis & Jason Strauss, 2008. "Privacy, Driving Data and Automobile Insurance: An Economic Analysis," Working Papers 2008-13, Department of Economics, University of Calgary, revised 14 Feb 2008.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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- George J. Stigler, 1980. "An Introduction to Privacy in Economics and Politics," University of Chicago - George G. Stigler Center for Study of Economy and State 10, Chicago - Center for Study of Economy and State.
- Crocker, Keith J & Snow, Arthur, 1986. "The Efficiency Effects of Categorical Discrimination in the Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 321-44, April.
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- Richard A. Posner, 1980. "The Economics of Privacy," University of Chicago - George G. Stigler Center for Study of Economy and State 16, Chicago - Center for Study of Economy and State.
- Lilia Filipova & Peter Welzel, 2005. "Reducing Asymmetric Information in Insurance Markets: Cars with Black Boxes," Discussion Paper Series 270, Universitaet Augsburg, Institute for Economics.
- Kai-Lung Hui & I.P.L. Png, 2005. "The Economics of Privacy," Industrial Organization 0505007, EconWPA, revised 29 Aug 2005.
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