Analysis of payment protection insurance on the Czech consumer credit market

Analýza pojištění schopnosti splácet na českém trhu spotřebitelských úvěrů

Mária Oborilová and Libor Coufal

Český finanční a účetní časopis, 2016, vol. 2016, issue 1, 25-47

Abstract: The article is focused on insurance products related to the indebtedness of Czech households in the area of consumer loans. The aim of this paper is, with the help of defined assumptions, to analyse the product payment protection insurance, its benefit to the final client and identify its appropriate use in the event of an economically rationally behaving entity. The authors analyse insurance conditions and define the pros and cons of insurance for supply-side and demand-side, and also focuses on information asymmetry. For completeness, the text is supplemented also in terms of cost of insurance, through the APR and development of acquisition costs for insurance contracts. Results of the analysis indicate not suitably configured product for clients, as evidenced by the low long-term value of loss ratio indicator, and information superiority on the supply side.

Keywords: Consumer loan; Payment protection insurance; Information asymmetry; Personal bankruptcy; Annual percentage rate (APR); Loss ratio; Spotřebitelský úvěr; Pojištění schopnosti splácet; Asymetrie informací; Osobní bankrot; Roční procentní sazba nákladů (RPSN) (search for similar items in EconPapers)
JEL-codes: D14 G21 G22 G23 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.18267/j.cfuc.466

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