Car Insurance Plans Could Make a Safer Society

Insurance companies do not differentiate their customers based on their driving behavior in Iran which leads to reckless driving and thereby imposes significant costs to society. We provided a model that can predict the effects of different policies and discounts on the market share of insurance companies. The usage of the model has been tested in the Tehran insurance market and the results provided showed that people would consider changing their insurance plans based on discounts and costs. Further, the first movers (i.e. the insurance companies that offer the discounts first) would absorb safer drivers and thereby stand in a superior financial position. This could significantly change the dynamics and the role of major players in the insurance market.

Premium Policies, Stated Preferences, Discrete Choice