Black boxes and market efficiency: the effect on premiums in the Italian motor-vehicle insurance market

Donatella Porrini, Giulio Fusco () and Cosimo Magazzino ()
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Giulio Fusco: Università del Salento

European Journal of Law and Economics, 2020, vol. 49, issue 3, No 5, 455-472

Abstract: Abstract The paper addresses the research question of whether black boxes affect the market efficiency, particularly by reducing the level of premiums. The case analyzed is the Italian motor-vehicle insurance market, characterized by the greatest amount of black boxes in the world as a consequence of regulatory interventions that fostered the spread of these kinds of devices. Particularly, using the data provided by the Italian Insurance Authority (IVASS), we show a specific relation between the increasing number of these devices and the decreasing trend in average premium. Conclusive remarks outline that in the near future this efficiency effect may increase because of the specific use of information derived from the black box that reveals the behaviors of the drivers and allows for innovative ways of individually profiling the insurance policies.

Keywords: Black box; Insurance market; Risk classification (search for similar items in EconPapers)
JEL-codes: G22 K20 L51 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10657-020-09657-3

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