26 Jul WHY ARE USAGE-BASED INSURANCE RATES LOWER THAN AT-RATE INSURANCE FEES?
usage-ba Show more With a GPS system attached to each insured vehicle insurance companies are able to charge usage-based insurance rates depending on how (e.g. hard breaking fast acceleration) how much (mileage) when and possibly where the insured vehicle is driven. Autograph (then associated with Progressive) a rm that was awarded a U.S. patent in 2001 was shown to save policy holders in Houston an average of 25% of what they were previously paying. (i) Why are usage-based insurance rates lower than at-rate insurance fees? Give two separate reasons and explain. [Hint: One is associated with hidden information one associated with hidden action.] Show less
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