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"Insurance companies Marketing."
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Tenure Dependence in Consumer-Firm Relationships: An Empirical Analysis of Consumer Departures from Automobile Insurance Firms
A typical pattern in markets featuring long-term consumer-firm relationships is for departure probabilities to decline with tenure. A crucial question is whether this actually implies increasing consumer preference for firms. If so, firms should actively try to convince consumers to remain through the early periods of the relationship and should enter new markets quickly. However, the pattern can also be explained by selection on unobserved heterogeneity. The challenge is to use the data available in these markets-generally details on the consumers of one firm-to distinguish between these explanations. I rely on individual price histories in auto insurance. Findings include an economically relevant level of both relationship effects and heterogeneity, but a much more important role for heterogeneity.
Journal Article
Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data
We show how data collected from a GPS device can be incorporated in motor insurance ratemaking. The calculation of premium rates based upon driver behaviour represents an opportunity for the insurance sector. Our approach is based on count data regression models for frequency, where exposure is driven by the distance travelled and additional parameters that capture characteristics of automobile usage and which may affect claiming behaviour. We propose implementing a classical frequency model that is updated with telemetrics information. We illustrate the method using real data from usage-based insurance policies. Results show that not only the distance travelled by the driver, but also driver habits, significantly influence the expected number of accidents and, hence, the cost of insurance coverage. This paper provides a methodology including a transition pricing transferring knowledge and experience that the company already had before the telematics data arrived to the new world including telematics information.
Journal Article
Dynamics of Demand for Index Insurance: Evidence from a Long-Run Field Experiment
This paper estimates how experimentally-manipulated experiences with a novel financial product, rainfall index insurance, affect subsequent insurance demand. Using a seven-year panel, we develop three main findings. First, recent experience matters for demand, consistent with overinference from small samples. Second, spillovers also matter, in the sense that the recent payout experience of village co-residents affects insurance demand about as much as one's own recent payout experience. Third, the spillover effect decays as time passes while the effect of one's own experience does not. We discuss implications of this analysis for commercial sustainability of this complicated but promising risk management technology.
Journal Article
Testing for Adverse Selection in Insurance Markets
This article reviews and evaluates the empirical literature on adverse selection in insurance markets. We focus on empirical work that seeks to test the basic coverage—risk prediction of adverse selection theory—that is, that policyholders who purchase more insurance coverage tend to be riskier. The analysis of this body of work, we argue, indicates that whether such a correlation exists varies across insurance markets and pools of insurance policies. We discuss various reasons why a coverage—risk correlation may not be found in some pools of insurance policies. The presence of a coverage—risk correlation can be explained either by moral hazard or adverse selection, and we discuss methods for distinguishing between them. Finally, we review the evidence on learning by policyholders and insurers.
Journal Article
Simultaneous or Sequential? Search Strategies in the U.S. Auto Insurance Industry
We study the identification of the search method consumers use when resolving uncertainty in the prices of alternatives. We show that the search method—simultaneous or sequential—is identified with data on consumers’ consideration sets (but not the sequence of searches), prices for the considered alternatives and marketwide price distributions. We show that identification comes from differences in the patterns of actual prices in consumers’ consideration sets across search methods. We also provide a new estimation approach for the sequential search model that uses such data. Using data on consumer shopping behavior in the U.S. auto insurance industry that contain information on consideration sets and choices, we find that the pattern of actual prices in consumers’ consideration sets is consistent with consumers searching simultaneously. Via counterfactuals we show that the consideration set and purchase market shares of the largest insurance companies are overpredicted under the incorrect assumption of sequential search. As the search method affects consumers’ consideration sets, which in turn influence brand choices, understanding the nature of consumer search and its implications for consideration and choice is important from a managerial perspective.
Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mksc.2016.0995
.
Journal Article
Decoding Customer–Firm Relationships: How Attachment Styles Help Explain Customers' Preferences for Closeness, Repurchase Intentions, and Changes in Relationship Breadth
Many firms strive to create relationships with customers, but not all customers are motivated to build close commercial relationships. This article introduces a theoretical framework that explains how relationshipspecific attachment styles account for customers' distinct preferences for closeness and how both attachment styles and preferences for closeness influence loyalty. The authors test their predictions with survey data from 1199 insurance customers and three years of purchase records for 975 of these customers. They find that attachment styles predict customers' preferences for closeness better than established marketing variables do. Moreover, attachment styles and preferences for closeness influence loyalty intentions and behavior, controlling for established antecedents (e.g., relationship quality). Finally, exploring the underlying process, the authors show that preference for closeness partially mediates the effect of attachment styles on cross-buying behavior. This research provides novel customer segmentation criteria and actionable guidelines that managers can use to improve their ability to tailor relationship marketing activities and more effectively allocate resources to match customer preferences.
Journal Article
The Advertising Effects of Corporate Social Responsibility on Corporate Reputation and Brand Equity: Evidence from the Life Insurance Industry in Taiwan
This study investigates the persuasive advertising and informative advertising effects of CSR initiatives on corporate reputation and brand equity based on the evidence from the life insurance industry in Taiwan. The study finds, first, policyholders' perceptions concerning the CSR initiatives of life insurance companies have positive effects on customer satisfaction, corporate reputation, and brand equity. Second, the advertising effects of the CSR initiatives on corporate reputation are only informative. Third, the impacts of CSR initiatives on brand equity include informative advertising and persuasive advertising effects. This study contributes the literature by explicit defining the advertising effects of CSR initiatives. Following the first step made by McWilliams et al. (Journal of Management Studies 43(1):1—18, 2006), the hypotheses of this study crystallize their conceptual framework. The obtained results in this research first identify the informative advertising effects and persuasive advertising effects of CSR initiatives.
Journal Article