Usage-Based insurance-Impact on insurers and potential implications for insurTech

Recurso electrónico / Electronic resource
MARC record
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100  ‎$0‎MAPA20190016414‎$a‎Che, Xin
24510‎$a‎Usage-Based insurance-Impact on insurers and potential implications for insurTech‎$c‎Xin Che
520  ‎$a‎Insurers are increasingly embracing the InsurTech ecosystem. The most important InsurTech-related trend in automobile insurance is usage-based insurance (UBI), which enables insurers to access and incorporate drivers' behavioral risk factors in actuarial pricing. Using a difference-in-difference research design with firm fixed effects, we provide evidence that UBI improves private passenger auto liability (PPAL) insurers' underwriting performance by reducing their loss ratio. However, the improvement in underwriting performance is only significant among early UBI adopters, highlighting the early-mover advantage in InsurTech. Also, UBI produces benefits only when it matures. Our findings are robust to analyses that address potential reverse causality and self-selection bias. Additional tests show that early UBI adopters experience a significant increase in their market share, implying UBI's advantage to attract low-risk drivers from other insurers. The overall performance effect of UBI programs for early adopters is a 1% increase in ROA and a 3% increase in ROE. The policy implications of our findings from the perspective of insurers should be of interest to firms' management, actuaries, investors, and rating agencies.
650 4‎$0‎MAPA20160005646‎$a‎Insurtech
650 4‎$0‎MAPA20080563639‎$a‎Pago por uso
650 4‎$0‎MAPA20080579258‎$a‎Cálculo actuarial
7730 ‎$w‎MAP20077000239‎$g‎12/09/2022 Tomo 26 Número 3 - 2022 , p. 428-455‎$x‎1092-0277‎$t‎North American actuarial journal‎$d‎Schaumburg : Society of Actuaries, 1997-