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How Cellphone Bans Affect Automobile Insurance Markets

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  • J. Bradley Karl
  • Charles Nyce

Abstract

In this article, we examine the effect of laws prohibiting the hand‐held use of a cellphone while driving on the automobile insurance market. Our research is motivated by prior studies that present evidence that the enactment of such laws alters drivers’ behaviors in ways that reduce the risk of automobile accidents. We posit that that, by extension, these laws should also lead to reductions in the amount of losses paid by private passenger automobile physical damage insurers. Our analysis indicates that the enactment of a ban on the hand‐held use of a cellphone while driving reduces the incurred losses and incurred loss ratios of automobile insurers by approximately 3 percent, suggesting that these bans have important economic consequences not previously documented in the literature. Additional analysis suggests that hand‐held cellphone bans eventually lead to incremental reductions in premiums, but we do not observe these reductions in premiums until a couple of years following the enactment of a ban. Our analysis of automobile insurance losses also represents a departure from most prior studies of cellphone bans and therefore contributes to the ongoing debate in the public health literature regarding the extent to which hand‐held cellphone bans have implications for traffic safety.

Suggested Citation

  • J. Bradley Karl & Charles Nyce, 2019. "How Cellphone Bans Affect Automobile Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(3), pages 567-593, September.
  • Handle: RePEc:bla:jrinsu:v:86:y:2019:i:3:p:567-593
    DOI: 10.1111/jori.12224
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    Cited by:

    1. J. Bradley Karl & Charles M. Nyce & Lawrence Powell & Boyi Zhuang, 2023. "How risky is distracted driving?," Journal of Risk and Uncertainty, Springer, vol. 66(3), pages 279-312, June.
    2. Jingshu Luo & Hua Chen & Martin Grace, 2022. "Medicaid expansion, tort reforms, and medical liability costs," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(3), pages 789-821, September.
    3. Mara Faccio & John J. McConnell, 2020. "Death by Pokémon GO: The Economic and Human Cost of Using Apps While Driving," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(3), pages 815-849, September.
    4. Berry-Stölzle, Thomas R. & Irlbeck, Steven, 2021. "Religiosity and risk taking: Is there a demand-side effect?," Journal of Corporate Finance, Elsevier, vol. 71(C).
    5. Sedar Olmez & Akhil Ahmed & Keith Kam & Zhe Feng & Alan Tua, 2023. "Exploring the Dynamics of the Specialty Insurance Market Using a Novel Discrete Event Simulation Framework: a Lloyd's of London Case Study," Papers 2307.05581, arXiv.org.
    6. Sedar Olmez & Akhil Ahmed & Keith Kam & Zhe Feng & Alan Tua, 2024. "Exploring the Dynamics of the Specialty Insurance Market Using a Novel Discrete Event Simulation Framework: A Lloyd's of London Case Study," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 27(2), pages 1-7.
    7. Randy E. Dumm & Charles Nyce & G. Stacy Sirmans & Greg T. Smersh, 2022. "Pricing Moral Hazard in Residential Properties: The Impact of Sinkhole Claims on House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 64(1), pages 30-70, January.

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