BEGIN:VCALENDAR VERSION:2.0 PRODID:researchseminars.org CALSCALE:GREGORIAN X-WR-CALNAME:researchseminars.org BEGIN:VEVENT SUMMARY:Mona Imanpoor Yourdshahy (Simon Fraser University) DTSTART:20230323T223000Z DTEND:20230323T233000Z DTSTAMP:20260513T193637Z UID:SFUOR/18 DESCRIPTION:Title: E ffects of Usage-Based Auto Insurance: A Dynamic Mechanism-Design Approach< /a>\nby Mona Imanpoor Yourdshahy (Simon Fraser University) as part of PIMS -CORDS SFU Operations Research Seminar\n\nLecture held in ASB 10908.\n\nAb stract\nUsage-Based Insurance (UBI) is one of the most recent innovations by auto insurance companies that links the premium rates of customers to t heir actual driving performance. In this program\, drivers’ behaviours a re monitored directly while they drive. Then\, the insurance company uses this data to offer discounts on the insurance premium to their customers. This paper provides a theoretical model to capture the effects of this mon itoring technology on the auto insurance market. We formulate the underlyi ng insurance problem as a dynamic principal-agent model with hidden inform ation and hidden action. An agent (customer) privately knows his type that summarizes his ability as a driver and can exert an unobservable effort i n each period\, which affects his subsequent type. The principal (insurer) offers a long-term contract to the agent despite the fact that she observ es neither the type of the agent nor the actions he takes. We characterize the full history-dependent optimal contract for this dynamic adverse sele ction and moral hazard problem. To compute the optimal contract\, we devel op a general recursive formulation. The underlying system is a Markov deci sion process\, where the evolution of the state of the system (type of the customer) is endogenous\, as it depends on his hidden action in the previ ous period. We develop a dynamic programming algorithm to examine the mode l analytically and explore structural results about the optimal contract. The model results lead to important and interesting managerial insights fo r firms who may consider offering UBI programs. The study sheds light on h ow to design the contract to manage a UBI program\, the extent to which a UBI policy can outperform a traditional policy\, and how the potential gai ns depend on the demographics of the target market.\n LOCATION:https://researchseminars.org/talk/SFUOR/18/ END:VEVENT END:VCALENDAR