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The (1992) bonus-malus system in Tunisia: An empirical evaluation

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  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Ghali, Olfa

    (Université de Tunis)

Abstract

The objective of this study is to assess empirically what impact introduction of the bonus-malus system has had on road safety in Tunisia. The results of the Tunisian experiment are now of particular importance since, during the last decade, many European countries decided to eliminate their bonus-malus scheme. These results indicate that the bonus-malus system reduced the probability of reported accident for good risks but had no effect on that of bad risks. Moreover, the overall effect of the reform on reported accidents rates is not statistically significant. This finding is explained by the fact that bad risks can switch to another insurer so as to escape the incentive effect imposed by the new rating policy. Many control variables are statistically significant in explaining the number of reported accidents: the vehicle’s horsepower, the policyholder’s place of residence, exits from the insurer portfolio, and the coverages for which policyholders are underwritten. The coefficient of the predicted exit variable is positive in explaining the number of accidents. This indicates that policyholders who switch company are higher risks. The final results were obtained by introducing random individual-specific effects to make joint estimates of the accident and selection equations.

Suggested Citation

  • Dionne, Georges & Ghali, Olfa, 2004. "The (1992) bonus-malus system in Tunisia: An empirical evaluation," Working Papers 03-7, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2003_007
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    1. Dionne, Georges & Vanasse, Charles, 1989. "A Generalization of Automobile Insurance Rating Models: The Negative Binomial Distribution with a Regression Component," ASTIN Bulletin, Cambridge University Press, vol. 19(2), pages 199-212, November.
    2. Georges Dionne & Olfa Ghali, 2005. "The (1992) Bonus‐Malus System in Tunisia: An Empirical Evaluation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(4), pages 609-633, December.
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    1. Georges Dionne & Olfa Ghali, 2005. "The (1992) Bonus‐Malus System in Tunisia: An Empirical Evaluation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(4), pages 609-633, December.
    2. Dhiti Osatakul & Xueyuan Wu, 2021. "Discrete-Time Risk Models with Claim Correlated Premiums in a Markovian Environment," Risks, MDPI, vol. 9(1), pages 1-23, January.
    3. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
    4. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
    5. Azaare Jacob & Zhao Wu, 2020. "An Alternative Pricing System through Bayesian Estimates and Method of Moments in a Bonus-Malus Framework for the Ghanaian Auto Insurance Market," JRFM, MDPI, vol. 13(7), pages 1-15, July.
    6. Ming-Jyh Wang & Chieh-Hua Wen & Lawrence W Lan, 2010. "Modelling Different Types of Bundled Automobile Insurance Choice Behaviour: The Case of Taiwan*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(2), pages 290-308, April.
    7. Sharon Tennyson, 2010. "Rethinking Consumer Protection Regulation in Insurance Markets," NFI Policy Briefs 2010-PB-07, Indiana State University, Scott College of Business, Networks Financial Institute.
    8. Katja Müller & Hato Schmeiser & Joël Wagner, 2016. "The impact of auditing strategies on insurers’ profitability," Journal of Risk Finance, Emerald Group Publishing, vol. 17(1), pages 46-79, January.
    9. Sharon Tennyson, 2010. "Incentive Effects of Community Rating in Insurance Markets: Evidence from Massachusetts Automobile Insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 35(1), pages 19-46, June.

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    More about this item

    Keywords

    Road safety; automobile insurance rating; bonus-malus; Tunisia; road accidents; panel data; probit; negative binomial distribution; Poisson distribution; random effects; selection model;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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