“Influence of the claimant’s behavioural features on motor compensation outcomes”
The decision to settle a motor insurance claim by either negotiation or trial is analysed. This decision may depend on how risk and confrontation adverse or pessimistic the claimant is. The extent to which these behavioural features of the claimant might influence the final compensation amount are examined. An empirical analysis, fitting a switching regression model to a Spanish database, is conducted in order to analyze whether the choice of the conflict resolution procedure is endogenous to the compensation outcomes. The results show that compensations awarded by courts are always higher, although 95% of cases are settled by negotiation. We show that this is because claimants are adverse to risk and confrontation, and are pessimistic about their chances at trial. By contrast, insurers are risk /confrontation neutral and more objective in relation to the expected trial compensation. During the negotiation insurers accept to pay the subjective compensation values of claimants, since these values are lower than their estimates of compensations at trial.
|Date of creation:||Jun 2011|
|Date of revision:||Jun 2011|
|Contact details of provider:|| Postal: Diagonal 690-696, 08034 Barcelona|
Phone: +34 93 402 43 13cazza
Web page: http://www.ub.edu/irea/
More information through EDIRC
References listed on IDEAS
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.:
- Hughes, James W & Snyder, Edward A, 1995. "Litigation and Settlement under the English and American Rules: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 225-250, April.
- Grochulski, Borys & Kareken, John, 2004. "Allen and Gale on risk-taking and competition in banking," Finance Research Letters, Elsevier, vol. 1(4), pages 236-240, December.
- Michael Lokshin & Zurab Sajaia, 2004. "Maximum likelihood estimation of endogenous switching regression models," Stata Journal, StataCorp LP, vol. 4(3), pages 282-289, September.
- Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
- Browne, Mark J & Puelz, Robert, 1999. "The Effect of Legal Rules on the Value of Economic and Non-economic Damages and the Decision to File," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 189-213, August.
- Hay, Bruce L, 1996. "Contingent Fees and Agency Costs," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 503-533, June.
- George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
- Santolino, Miguel, 2010. "Determinants of the decision to appeal against motor bodily injury judgements made by Spanish trial courts," International Review of Law and Economics, Elsevier, vol. 30(1), pages 37-45, March.
- I.P.L. P'ng, 1983. "Strategic Behavior in Suit, Settlement, and Trial," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 539-550, Autumn.
- Helen Doerpinghaus & Joan Schmit & Jason Jia-Hsing Yeh, 2003. "Personal Bias in Automobile Claims Settlement," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(2), pages 185-205.
- Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
- Helen I. Doerpinghaus & Joan T. Schmit & Jason Jia-Hsing Yeh, 2008. "Age and Gender Effects on Auto Liability Insurance Payouts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 527-550.
- Ellen Garbarino & Robert Slonim & Justin Sydnor, 2011. "Digit ratios (2D:4D) as predictors of risky decision making for both sexes," Journal of Risk and Uncertainty, Springer, vol. 42(1), pages 1-26, February.
- Mark J. Browne & Joan T. Schmit, 2008. "Litigation Patterns in Automobile Bodily Injury Claims 1977-1997: Effects of Time and Tort Reforms," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(1), pages 83-100.
When requesting a correction, please mention this item's handle: RePEc:ira:wpaper:201108. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alicia García)
If references are entirely missing, you can add them using this form.