Miles, speed, and technology: Traffic safety under oligopolistic insurance

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We study road safety when insurance companies have market power, and can influence drivers' behavior via insurance premiums. We obtain first- and second-best premiums for different insurance market structures. The insurance program consists of an insurance premium, and marginal dependencies of that premium on speed and own safety technology choice of drivers. A private monopolist internalizes collision externalities up to the point where compensations to users' benefit matches the full (intangible) costs; in oligopolistic markets, insurers do not fully internalize collision externalities. Analytical results demonstrate how insurance firms' incentives to influence traffic safety coincide with or deviate from socially optimal incentives. Our results may be useful for design of pay-as-you-speed and alike insurances as well as policies related to driving safety.
Original languageEnglish
Pages (from-to)147-162
JournalTransportation Research. Part B: Methodological
Volume86
Issue numberApril
DOIs
Publication statusPublished - 2016

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traffic safety
Insurance
insurance
premium
driver
incentive
insurance company
market power
market
road
firm
costs
Costs
Industry

Cite this

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title = "Miles, speed, and technology: Traffic safety under oligopolistic insurance",
abstract = "We study road safety when insurance companies have market power, and can influence drivers' behavior via insurance premiums. We obtain first- and second-best premiums for different insurance market structures. The insurance program consists of an insurance premium, and marginal dependencies of that premium on speed and own safety technology choice of drivers. A private monopolist internalizes collision externalities up to the point where compensations to users' benefit matches the full (intangible) costs; in oligopolistic markets, insurers do not fully internalize collision externalities. Analytical results demonstrate how insurance firms' incentives to influence traffic safety coincide with or deviate from socially optimal incentives. Our results may be useful for design of pay-as-you-speed and alike insurances as well as policies related to driving safety.",
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Miles, speed, and technology: Traffic safety under oligopolistic insurance. / Dementieva, M.; Verhoef, E.T.

In: Transportation Research. Part B: Methodological, Vol. 86, No. April, 2016, p. 147-162.

Research output: Contribution to JournalArticleAcademicpeer-review

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