Privacy, Driving Data and Automobile Insurance: An Economic Analysis

Aidan Hollis and Jason David Strauss

No 2008-13, Working Papers from Department of Economics, University of Calgary

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.

Keywords: Insurance markets; Asymmetric information; Privacy (search for similar items in EconPapers)
Date: 2008-02-14, Revised 2008-02-14

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Working Paper: Privacy, Driving Data and Automobile Insurance: An Economic Analysis (2007)
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