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An Analysis of the Determinants of the Demand for Automobile Insurance

William A. Sherden
The Journal of Risk and Insurance
Vol. 51, No. 1 (Mar., 1984), pp. 49-62
DOI: 10.2307/252800
Stable URL: http://www.jstor.org/stable/252800
Page Count: 14
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
An Analysis of the Determinants of the Demand for Automobile Insurance
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Abstract

This article examines the effect of price, income, and perceived risk on the demand for three major automobile insurance coverages: bodily injury, comprehensive, and collision. The research approach involved a cross-sectional analysis of insurance consumption patterns in the 359 towns and cities in the state of Massachusetts in 1979. The major findings were that the demand for the three coverages was generally inelastic with respect to price and income, that the demand for comprehensive and collision coverages was price-elastic at prices 1.6 times the state average price, and that the demand for comprehensive and collision coverages increased substantially from areas of low density to areas of moderate density.

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