Highlights ► We examine the effects of bundled insurance purchases on the probability of filing accident claims. ► Based on simultaneous equations and probit models, we identify the mutual relationships between two types of automobile insurance and the tendency of having claims. ► Given the same coverage of vehicle damage insurance without a deductible, higher voluntary liability insurance coverage is found to reduce the probability of vehicle accident claims.

    Abstract This paper investigates the characteristics of automobile accidents by taking into account two types of automobile insurance coverage: comprehensive vehicle physical damage insurance and voluntary third-party liability insurance. By using a unique data set in the Taiwanese automobile insurance market, we explore the bundled automobile insurance coverage and the occurrence of claims. It is shown that vehicle physical damage insurance is the major automobile coverage and affects the decision to purchase voluntary liability insurance coverage as a complement. Moreover, policyholders with high vehicle physical damage insurance coverage have a significantly higher probability of filing vehicle damage claims, and if they additionally purchase low voluntary liability insurance coverage, their accident claims probability is higher than those who purchase high voluntary liability insurance coverage. Our empirical results reveal that additional automobile insurance coverage information can capture more driver characteristics and driving behaviors to provide useful information for insurers’ underwriting policies and to help analyze the occurrence of automobile accidents.


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    Title :

    Bundled automobile insurance coverage and accidents


    Contributors:

    Published in:

    Publication date :

    2012-03-21


    Size :

    9 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English




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