Pay-as-you-drive Pricing Model:Research and Reference
|School||Dongbei University of Finance|
|Keywords||vehicle insurance pay-as-you-drive riskfactor externality|
Since the opium war car insurance entered our country, the development of the auto insurance business has experienced a tortuous process. In1950, the People’s Insurance Company of China began to open car insurance, but for lack of propaganda and cognition bias, in1955, the car insurance stopped the operation. In1980, automobile insurance business had been comprehensively recovered in China, but only occupied2%of the property insurance market share. Along with the development of the situation of reform and opening-up, great changes have taken place in people’s life and social economy,and vehicle insurance business has got rapid development. In1988, premium income of auto insurance was more than2billion yuan, which became the biggest property insurance coverage. But with the increasing number of vehicles, the resulting environmental problems, such as environment、premium fairness problem is increasingly serious. The Progresscompany pioneered the pricing according to the mileage car insurance.By effectively internalized the drivers’ negative externalities, it became an available solution and in the subsequent decade can be widely applied in the world.Scientific rate is the premise of the stability of car insurance development. In2012, the insurance industry association of our country released (ABC) clause, which marked the implementation of motor vehicle insurance premium rate’s marketization. The clause setthat mileage should also be a risk factor. But in the concrete implementation, due to the lack of necessary data and mandatory policy in our country, mileage has not been included in specific pricing range.This paper set the starting point according to the mileage vehicle insurance development in abroad, and based on the theory of finance, actuarial science, statistics. Combining quantitative and qualitative, theoretical research and empirical analysis methods, this paper analyze the rationality and practical significance of the the mileage car insurance pricing model. Through the analysis of theory and data come to the conclusion that charging according to the mileage can enhance automobile insurance premiums fairness and bring a lot of external effects. Connecting with the concrete situation in our country, this paper put forward some recommendations of the implementation of the mileage car insurance in our country.Because of the lack of relevant data, this paper is based on the empirical analysis and have adopted the CLF research report of the data. The structure of this paper can be divided into five parts:The first part is introduction, which describe the selected topic backgroundsignificance of this study, domestic and international literature review, research idea, structure arrangement and lack and innovation of this article.The second part is to introduce the rise, development and obstacles during development ofthe mileage car insurance in foreign countries.The third partintroduces and summarizes the common four foreign pay-as-you-drive car insurancescheme,and comparative analysis. When comparing four kinds of pricing schemes, from a technical point, externality, feasibility, etc, and come to the quantitative analysis of the different pricing schemes.lt is concluded that all of the car insurance and registration fee priced as mileage is the most effective.The fourth part:by establishing the static model, analyzed the influence of the pay-as-you-drive car insurance on driver behavior.The fifth part:according to the CLF study data analyzethe relation of mileage and risk from two aspects:compensation for damage and accident frequency.This part build the model of fuel and mileage,and research the relationship between specific fuel consumption and mileage, which come to the conclusion of the effects on environment pollution.The sixth partanalyzes the possible problems pay-as-you-drive car insurance should face when implementing in our country and puts forward some measures.This article analyzethe relation of mileage and risk from twoaspects:compensation for damage and accident frequency according to the data for the first time,and build the model of fuel and mileagewhich research the relationship betweenspecific fuel consumption and mileage.After implement the pay-as-you-drive car insurance, the reduction of fuel consumption will have a positive effect on environment. In addition to the empirical analysis, the article use mathematics method to establish the static model of the analysis of the effect of implementation of pay-as-you-drive insurance on drivers’behavior:overall high mileage drivers reduce mileage and low mileage drivers increase mileage. But due to the lack of domestic vehicle traffic mileage, the selection of data are all abroad, may not be so specific, so the follow-up recommendations can’t specific to each province andregions in our country, whichneed further research under the improvement of technology in the future.