The (1992) bonus-malus system in Tunisia: An empirical evaluation

Georges Dionne () and Olfa Ghali
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Olfa Ghali: Université de Tunis

No 03-7, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: The objective of this study is to assess empirically what impact introduction of the bonus-malus system has had on road safety in Tunisia. The results of the Tunisian experiment are now of particular importance since, during the last decade, many European countries decided to eliminate their bonus-malus scheme. These results indicate that the bonus-malus system reduced the probability of reported accident for good risks but had no effect on that of bad risks. Moreover, the overall effect of the reform on reported accidents rates is not statistically significant. This finding is explained by the fact that bad risks can switch to another insurer so as to escape the incentive effect imposed by the new rating policy. Many control variables are statistically significant in explaining the number of reported accidents: the vehicle’s horsepower, the policyholder’s place of residence, exits from the insurer portfolio, and the coverages for which policyholders are underwritten. The coefficient of the predicted exit variable is positive in explaining the number of accidents. This indicates that policyholders who switch company are higher risks. The final results were obtained by introducing random individual-specific effects to make joint estimates of the accident and selection equations.

Keywords: Road safety; automobile insurance rating; bonus-malus; Tunisia; road accidents; panel data; probit; negative binomial distribution; Poisson distribution; random effects; selection model (search for similar items in EconPapers)
JEL-codes: D81 G22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-07-01
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Related works:
Journal Article: The (1992) Bonus‐Malus System in Tunisia: An Empirical Evaluation (2005)
Working Paper: The (1992) Bonus-Malus System in Tunisia: An Empirical Evaluation (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2003_007

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