You are welcome to join the Research Seminar of the Department of Economics and Finance of Tallinn University of Technology (TalTech) on Wednesday, 22 May at 16:00-17:00.
In MS Teams, please join via LINK
“Explaining consumer inertia: Drivers of attention and choice in car insurance market”
Kaido Kepp and Kadri Männasoo (Department of Economics and Finance, TalTech)
We study the vehicle lessees’ Motor Own Damage insurance search frictions and choices. We use a consumer-level annual panel of policy and insurance offers’ data from 2010-2018 from the biggest insurance broker consolidating the Estonian car insurance market offers. We apply the two-stage discrete choice model by Hortaçsu et al 2017 that identifies the sources of consumer inertia by separating the attention and choice decisions given the observed switches to new providers. Our results show strong inertia that stems from consumer inattention and considerable heterogeneity of inattention across consumer groups. Consumers choose from a set of offers and their decisions to switch or stay with the current provider reveal substantial price elasticity and a modest effect of insurance provider’s brand preference.
Keywords: car insurance, consumer behavior, choice frictions, consumer inertia, inattention
JEL classification: D12, D83, G22, G52, L84, M31
Authors: Kaido Kepp (Department of Economics and Finance, TalTech), Kadri Männasoo (Department of Economics and Finance, TalTech)
Funding: This work was supported by the European Economic Area (EEA) Financial Mechanism 2014–2021 Baltic Research Program under project S-BMT-21-8 (LT08-2-LMT-K-01-073), COST Action HiTEc, CA21163 (European Cooperation in Science and Technology) and the European Commission Research and Innovation program grant (agreement 952547).