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  • Automobile Insurance: Road Safety, New Drivers, Risks, Insurance Fraud and Regulation

  • CENTRE FOR RESEARCH ON TRANSPORTATION 2STH ANNIVERSARY SERIES 1971 . 1996

    EQUILIBRIUM AND ADVANCED TRANSPORTATION MODELLING edited by Patrice Marcotte and Sang Nguyen

    TELECOMMUNICATIONS NETWORK PLANNING edited by Brunilde Sanso and Patrick Soriano

    FLEET MANAGEMENT AND LOGISTICS edited by Teodor Gabriel Crainic and Gilbert Laporte

    AUTOMOBILE INSURANCE: Road Safety, New Drivers, Risks, Insurance Fraud and Regulation edited by Georges Dionne and Claire Laberge-Nadeau

    TAKING STOCK OF AIR LIBERALIZATION edited by Marc Gaudry and Robert Mayes

  • Huebner International Series on Risk, Insurance, and Economic Security

    J. David Cummins, Editor The Wharton School University of Pennsylvania Philadelphia, Pennsylvania, USA

    Series Advisors:

    Dr. Phelim P. Boyle University ofWaterloo, Canada

    Dr. Jean Lemaire University of Pennsylvania, USA

    Professor Akihiko Tsuboi Kagawa University, Japan

    Dr. Richard Zeckhauser Harvard University, USA

    Other books in the series:

    Cummins, J. David and Derrig, Richard A: Classical Insurance Solvency Theory

    Borba, Philip S. and Appel, David: Benefits, Costs, and Cyc/es in Workers' Compensation

    Cummins, J. David and Derrig, Richard A: Financial Models of Insurance Solvency

    Williams, C. Arthur: An International Comparison of Workers' Compensation

    Cummins, J. David and Derrig, Richard A: Managing the Insolvency Risk of Insurance Companies

    Dionne, Georges: Contributions to Insurance Economics Dionne, Georges and Harrington, Scott E.: Foundations of Insurance Economics

    Klugman, Stuart A: Bayesian Statistics in Actuarial Science Durbin, David and Borba, Philip: Workers' Compensation Insurance:

    Claim Costs, Prices and Regulation Cummins, J. David: Financial Management of Life Insurance

    Companies Gustavson, Sandra G. and Harrington, Scott E.: Insurance, Risk Management, and Public Policy

    Lemaire, Jean: Bonus-Malus Systems in Automobile Insurance

  • Automobile Insurance: Raad Safety, New Drivers, Risks, Insurance Fraud and Regulatian

    Edited by

    Georges Dionne HEC, Montreal

    Claire Laberge-Nadeau Universite de Montreal

    .... " Springer Science+Business Media, LLC

  • ISBN 978-1-4613-6817-5 ISBN 978-1-4615-4058-8 (eBook)

    DOI 10.1007/978-1-4615-4058-8

    Library of Congress Cataloging-in-Publication Data

    A C.I.P. Catalogue record for this book is available from the Library of Congress.

    Copyright 1999 by Springer Science+Business Media New York

    Originally published by Kluwer Academic Publishers in 1999 Softcover reprint ofthe hardcover Ist edition 1999

    AII rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photo-copying, recording, or otherwise, without the prior written permission of the publisher, Springer Science + Business Media, LLC

    Printed an acid-free paper.

  • Contents

    Guest Speakers and Contributing Authors

    Referees

    Preface

    Preface

    Foreword

    Introduction Georges Dionne and Claire Laberge-Nadeau

    SECTION 1 Automobile Insurance Pricing, Risks, and Asymmetric Information

    1 ASYMMETRIC INFORMATION IN AUTOMOBILE INSURANCE: AN OVERVIEW Pierre-Andre Chiappori

    2 EVIDENCE OF ADVERSE SELECTION IN AUTOMOBILE INSURANCE

    MARKETS Georges Dionne, Christian Gourihoux and Charles Vanasse

    3 ALLOWANCE FOR HIDDEN INFORMATION BY HETEROGENEOUS

    MODELS AND APPLICATIONS TO INSURANCE RATING Jean Pinquet

    4 BAYESIAN ANALYSIS OF ROAD ACCIDENTS: A GENERAL FRAMEWORK

    ix

    xi

    xiii

    xv

    xvii

    xix

    13

    47

    FOR THE MULTINOMIAL CASE 79 Denis Bolduc and Sylvie Bonin

    Contents

    Guest Speakers and Contributing Authors

    Referees

    Preface

    Preface

    Foreword

    Introduction Georges Dionne and Claire Laberge-Nadeau

    SECTION 1 Automobile Insurance Pricing, Risks, and Asymmetric Information

    1 ASYMMETRIC INFORMATION IN AUTOMOBILE INSURANCE: AN OVERVIEW Pierre-Andre Chiappori

    2 EVIDENCE OF ADVERSE SELECTION IN AUTOMOBILE INSURANCE

    MARKETS Georges Dionne, Christian Gourihoux and Charles Vanasse

    3 ALLOWANCE FOR HIDDEN INFORMATION BY HETEROGENEOUS

    MODELS AND APPLlCATIONS TO INSURANCE RATING Jean Pinquet

    4 BAYESIAN ANALYSIS OF ROAD ACCIDENTS: A GENERAL FRAMEWORK

    ix

    xi

    xiii

    xv

    xvii

    xix

    13

    47

    FOR THE MULTINOMIAL CASE 79 Denis Bolduc and Sylvie Bonin

  • viii AUTOMOBILE INSURANCE

    5 COMMERCIAL VEHICLE INSURANCE: SHOULD FLEET POLICIES DIFFER

    FROM SINGLE VEHICLE PLANS? 101 Claude Fluet

    SECTION 2 Insurance Fraud

    6 COSTLY STATE FALSIFICATION OR VERIFICATION? THEORY AND

    EVIDENCE FROM BODILY INJURY LIABILITY CLAIMS Keith J. Crocker and Sharon Tennyson

    7 THE FREQUENCY OF EXCESS CLAIMS FOR AUTOMOBILE PERSONAL

    119

    INJURIES 131 Alan F. Abrahamse and Stephen J. Carroll

    8 WHEN IS THE PROPORTION OF CRIMINAL ELEMENTS IRRELEVANT?

    A STUDY OF INSURANCE FRAUD WHEN INSURERS CANNOT COMMIT 151 Martin Boyer

    9 INSURANCE FRAUD ESTIMATION: MORE EVIDENCE FROM THE QUEBEC

    AUTOMOBILE INSURANCE INDUSTRY 175 Louis Caron and Georges Dionne

    SECTION 3 Guest Speakers

    10 THE SOCIETE DE L.:ASSURANCE AUTOMOBILE DU QUEBEC -

    AN INTEGRATED MODEL OF ACTION TO INSURE AND PROTECT PEOPLE FROM RISKS INHERENT IN USE OF THE ROAD 183

    Jean-Yves Gagnon

    11 THEY CHEAT, YOU PAY! Raymond Medza

    SECTION 4 Young and New Drivers: Licencing Policies, Evaluation and Risks

    12 GRADUATED LICENSING IN QUEBEC: THE SEARCH FOR BALANCE

    191

    BETWEEN MOBILITY AND SAFETY 195 Claude Dussault and Patrice Letendre

    viii AUTOMOBILE INSURANCE

    5 COMMERCIAL VEHICLE INSURANCE: SHOULD FLEET POLICIES DIFFER

    FROM SINGLE VEHICLE PLANS? 101 Claude Fluet

    SECTION2 Insurance Fraud

    6 COSTLY STATE FALSIFICATION OR VERIFICATION? THEORY AND

    EVIDENCE FROM BODILY INJURY LlABILlTY CLAIMS Keith J. Crocker and Sharon Tennyson

    7 THE FREQUENCY OF EXCESS CLAIMS FOR AUTOMOBILE PERSONAL

    119

    INJURIES 131 Alan F. Abrahamse and Stephen J. Carroll

    8 WHEN IS THE PROPORTION OF CRIMINAL ELEMENTS IRRELEVANT?

    A STUDY OF INSURANCE FRAUD WHEN INSURERS CANNOT COMMIT 151 Martin Boyer

    9 INSURANCE FRAUD ESTIMATION: MORE EVIDENCE FROM THE QUEBEC

    AUTOMOBILE INSURANCE INDUSTRY 175 Louis Caron and Georges Dionne

    SECTION 3 Guest Speakers

    10 THE SOCIETE DE L.:ASSURANCE AUTOMOBILE DU QUEBEC -

    AN INTEGRATED MODEL OF ACTION TO INSURE AND PROTECT PEOPLE FROM RISKS INHERENT IN USE OF THE ROAD 183

    Jean-Yves Gagnon

    11 THEY CHEAT, YOU PAY! Raymond Medza

    SECTION 4 Young and New Drivers: Licencing Policies, Evaluation and Risks

    12 GRADUATED LlCENSING IN QUEBEC: THE SEARCH FOR BALANCE

    191

    BETWEEN MOBILlTY AND SAFETY 195 Claude Dussault and Patrice Letendre

  • Contents ix

    13 AN EVALUATION OFTHE EFFECTS ON CRASHES OF THE 1991

    LEGISLATIVE REFORM ON NEW LICENSEES IN QUEBEC 201 Urs Maag, Georges Dionne, Denise Desjardins, Stephane Messier and

    Claire Laberge-Nadeau

    14 LICENSING POLICIES FOR YOUNG DRIVERS IN THE UNITED STATES 215 Allan F. Williams

    15 REDUCING THE RISK OF NEW DRIVERS THROUGH LEGISLATION AND

    REGULATION 221 Dan Mayhew

    16 EVALUATION OF THE ACCOMPANIED DRIVER TRAINING BY MEANS OF

    A MARKOV CHAIN 231 Sylvain Lassarre and Pierre-Alain Hoyau

    17 RISKY DRIVING BY YOUTH A. lames McKnight

    18 YOUNG PEOPLE, ALCOHOL AND RISKS lean-Paul Assailly

    SECTION 5 Road Insurance Regulation

    19 NO FAULT AUTOMOBILE INSURANCE AND ACCIDENT SEVERITY:

    LESSONS STILL TO BE LEARNED Rose Anne Devlin

    20

    243

    253

    267

    THE INCENTIVE EFFECTS OF NO FAULT AUTOMOBILE INSURANCE 283 l. David Cummins and Mary A. Weiss

    21 ESTIMATING THE EFFECTS OF "NO-PAY, NO-PLAY" AUTO INSURANCE

    PLANS ON THE COSTS OF AUTO INSURANCE: THE EFFECTS OF PROPOSITION 213 309

    Stephen l. Carroll and Allan F. Abrahamse

    22 ANALYSIS OF THE ECONOMIC IMPACT OF MEDICAL AND OPTOMETRIC

    DRIVING STANDARDS ON COSTS INCURRED BY TRUCKING FIRMS AND ON THE SOCIAL COSTS OF TRAFFIC ACCIDENTS 323

    Georges Dionne. Claire Laberge-Nadeau. Denise Desjardins. Stephane Messier and Urs Maag

    Contents ix

    13 AN EVALUATION OFTHE EFFECTS ON CRASHES OFTHE 1991

    LEGISLATIVE REFORM ON NEW LlCENSEES IN QUEBEC 201 Urs Maag, Georges Dionne, Denise Desjardins, Stephane Messier and

    Claire Laberge-Nadeau

    14 LlCENSING POLICIES FOR YOUNG DRIVERS IN THE UNITED STATES 215 Alian F. Williams

    15 REDUCING THE RISK OF NEW DRIVERS THROUGH LEGISLATION AND

    REGULATION 221 Dan Mayhew

    16 EVALUATION OF THE ACCOMPANIED DRIVER TRAINING BY MEANS OF

    A MARKOV CHAIN 231 Sylvain Lassarre and Pierre-Alain Hoyau

    17 RISKY DRIVING BY YOUTH A. lames McKnight

    18 YOUNG PEOPLE, ALCOHOL AND RISKS lean-Paul Assailly

    SECTION 5 Road Insurance Regulation

    19 NO FAULT AUTOMOBILE INSURANCE AND ACCIDENT SEVERITY:

    LESSONS STILL TO BE LEARNED Rose Anne Dev/in

    20

    243

    253

    267

    THE INCENTIVE EFFECTS OF NO FAULT AUTOMOBILE INSURANCE 283 1. David Cummins and Mary A. Weiss

    21 ESTIMATING THE EFFECTS OF "NO-PAY, NO-PLAY" AUTO INSURANCE

    PLANS ON THE COSTS OF AUTO INSURANCE: THE EFFECTS OF PROPOSITION 213 309

    Stephen 1. Carroll and Alian F. Abra

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