Title: Explaining switching behavior: Consumer attention and choice in car insurance market Authors:  Kadri Maennasoo - Tallinn University of Technology (Estonia) [presenting]
Kaido Kepp - Tal (Estonia)
Abstract: The focus is on the vehicle lessees' Motor Own Damage insurance search frictions and choices. We use a consumer-level annual panel of policy and insurance offers data over 2010-2018 from the biggest insurance broker, consolidating the Estonian car insurance market offers. We apply the two-stage discrete choice model, building on previous work that identifies the sources of consumer inertia by separating the attention and choice decisions given the observed switches to new providers. Consumers choose from a set of pre-listed offers corresponding to the best alternative choices available in the market. Our results show strong inertia that stems from consumer inattention and considerable heterogeneity of inattention across consumer groups. Consumers' decisions to switch or stay with the current provider reveal substantial price elasticity and only a modest effect of the insurance providers' brand preference. Multiple robustness checks confirm adequate prediction and plausibility of our estimates.