The (1992) Bonus-Malus System in Tunisia: An Empirical Evaluation
Journal of Risk and Insurance 72, 4, 609-633, 2005
28 Pages Posted: 10 Nov 2003 Last revised: 11 Jan 2023
Date Written: October 1, 2003
Abstract
The objective of this study is to assess empirically what impact introduction of the bonus-malus system has had on road safety in Tunisia. The result of such experiment is important because many European countries decided to eliminate their bonus-malus scheme during the last decade. Results indicate that the bonus-malus system reduced the probability of accident for good risks but had no effect on that of bad risks. This finding is explained by the fact that bad risks can switch to another insurer so to escape the incentive effect imposed by the new rating policy. Many control variables are significant in explaining the number of accidents: the vehicle's horsepower, the policyholder's place of residence, entries and exists in the insurer portfolio, and the coverages for which policyholders are underwritten. The coefficients of the entry and exit variables are positive and indicate that those who switch company are bad risks.
Keywords: Road safety, automobile insurance rating, bonus-malus, Tunisia, road accidents, panel data, probit, negative binomial distribution, Poisson distribution, random effects
JEL Classification: D81, G22
Suggested Citation: Suggested Citation