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Do insurers adjust prices for the adoption of loss prevention technologies? Evidence from Danish municipal contracts

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  • Simon Sølvsten
  • Brooks Kaiser

Abstract

Using data from 40 Danish municipalities on building characteristics, loss prevention technologies, insurance claims, and insurance bids from 2008 to 2019, we investigate whether and how loss prevention technologies influenced contract prices. The insurance bids cover a variety of municipal buildings across a range of risks including fire, water leakage, and building security as well as structure detection and alarm systems. The study shows that the magnitude of historical claims may affect both pricing offers and interest in loss prevention technologies. We do not find that loss prevention technologies have any significant influence on contract price. This suggests inefficiencies in the market from imperfect information.

Suggested Citation

  • Simon Sølvsten & Brooks Kaiser, 2023. "Do insurers adjust prices for the adoption of loss prevention technologies? Evidence from Danish municipal contracts," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 26(1), pages 57-82, March.
    • Handle: RePEc:bla:rmgtin:v:26:y:2023:i:1:p:57-82
    DOI: 10.1111/rmir.12231
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    References listed on IDEAS

    as
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    3. repec:eme:prrpps:prr-12-2018-0033 is not listed on IDEAS
    4. Katrien Antonio & Emiliano Valdez, 2012. "Statistical concepts of a priori and a posteriori risk classification in insurance," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 96(2), pages 187-224, June.
    Full references (including those not matched with items on IDEAS)

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