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Drivers of Switching in Autoinsurance: Evidence from Observable and Exogenous Consideration Sets

Author

Listed:
  • Perrone, Helena
  • Valiati, Fabricio

Abstract

This paper studies switching behavior and its determinants in auto-insurance markets using a dataset that includes information on policyholder choices and their consideration sets, including alternative contract prices. We show that disregarding consumers’ consideration sets and the price of alternative offers, especially the premium offered by the previous insurance at renewal, leads to an overestimation of choice inertia and an understatement of consumer price responsiveness. We also find that previous claim history is a primary determinant of switching behavior, even after controlling for premium differentials and observed and unobserved characteristics of the contract and insurers. Our empirical evidence is consistent with choice inertia driven by learning about the true quality of the firm’s service.

Suggested Citation

  • Perrone, Helena & Valiati, Fabricio, 2025. "Drivers of Switching in Autoinsurance: Evidence from Observable and Exogenous Consideration Sets," CEPR Discussion Papers 20707, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20707
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    File URL: https://cepr.org/publications/DP20707
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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