Insurance Telematics and Its Effect on the Equilibrium on the Motor Insurance Market

Abstract

The main objective of the book is to assess the potential consequences of the use of insurance telematics to reduce the effects of information asymmetry on the Polish market of compulsory motor insurance. The conducted research consisted in describing the expected behaviour of the models of the mandatory motor insurance market in relation to different systems regarding the use of telematics by insurers.

The book consists of five chapters. The first chapter introduces the subject of information asymmetry and defines certain categories of information that are utilised in market games. A particular emphasis was placed on the studies related to the problem of the lack of equilibrium in the competitive insurance market and on the attempts, made so far, to solve the above problem.

The second chapter briefly describes the motor insurance market. The historical aspect as well as the current state of the Polish market and that of the European Union were touched upon in it. Much of the chapter has been devoted to the compulsory third party liability insurance. With respect to this type of insurance, the characteristics of the legal specifics of its functioning as well as its financial condition were presented.

The third chapter is an introduction to the subject of insurance telematics. It touches upon the historical aspect of deliberations about telematics. It is also the summary of the research that has been carried out in the recent years. What is more, this chapter attempts at systematising the definitions of individual terms related to insurance using telematics solutions.

In the fourth chapter, the theoretical possibility of achieving the equilibrium by the market was verified utilising the three telematics solutions developed in practice. The results of the risk assessment, obtained after the implementation of the above strategies, should potentially result not only in the individualisation of premiums, but also in the possibility of determining the appropriate level of technical provisions. The analysis covered scenarios differing in the scope of assumptions regarding the technique of collecting telematic data for the needs of the insurer.

The fifth chapter discusses the results of a survey conducted on a sample of clients of insurance companies, whose aim was to empirically confirm the correctness of assumptions adopted during the analysis of the behaviour of economic models used in the fourth chapter.

The conclusions obtained as part of the study can be used to formulate recommendations for insurers and the legislator alike regarding the right direction of development of the compulsory motor insurance market. In addition, the analysis of foreign literature will allow for the incorporation of knowledge about insurance telematics onto the market in Poland, at least partially closing the existing information gap.

Keywords:

Motor insurance, Market equilibrium, Insurance telematics, Usage-based insurance (UBI)