Munich Personal RePEc Archive

Privacy, Driving Data and Automobile Insurance: An Economic Analysis

Hollis, Aidan and Strauss, Jason (2007): Privacy, Driving Data and Automobile Insurance: An Economic Analysis.

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Abstract

With new technologies that enable insurers to electronically monitor vehicles and drivers, insurers should be able to price automobile insurance more accurately, creating individualized prices for consumers. The welfare effects of lower prices are straightforward, but we also consider that consumers have heterogeneous valuations of privacy that they may lose if they adopt the monitoring technologies. We examine the voluntary market adoption of these monitoring technologies and its effect on equilibrium prices and welfare. We find a welfare effect equal to the loss in privacy, but conclude that the overall effect is ambiguous without considering moral hazard.

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