This wonderful quote from the character Edna Mode in The Incredibles seems a fitting way to start the year. It’s also fitting to introduce a newly published paper with my colleague Simon Sølvsten. At first glance, the work may seem like a departure from previous topics for me. In the paper, we investigate whether and how insurance contract prices reflect the adoption of loss prevention technologies like fire, burglar, or water alarms. We show that the industry must have some inefficiencies that prevent the benefits of loss prevention technologies in reducing insurance costs to filter in to prices, at least for large Danish municipality contracts covering multiple buildings and risks.
The topic does take me back in time to my applied microeconomic foundations. It is also a first small step forward in exploring the potential and limitations of insurance in coping with the growing risks and uncertainties we face with climate change and other uncertainties. Looking on from the now, I am eager to dive into many more questions about the potential for insurance in reducing societal transition costs, and companion questions regarding how the limitations might be addressed by both the insurance industry and other social investments or decision-making.
In the meantime, check out the paper here:
Sølvsten, S and B Kaiser, 2022. Do insurers adjust prices for the adoption of loss prevention technologies? Evidence from Danish municipal contracts, Risk Management and Insurance Review
Cover Photo Credit: “Yes, dahling, whatever…” by Thom Watson is licensed under CC BY-NC-SA 2.0.