Abstract: People rarely change their incumbent service provider. This inertia is usually interpreted as market friction, mainly due to search or switching cost, or explained with learning about an intangible good. Less studied are the actual triggers for learning, especially whether the learners’ own behavior triggers the learning. We analyze field data on car insurance renewal choices, in which all offered and chosen features, including claims details, are known. We follow a random utility approach and find that switching insurers is mainly driven by direct monetary gains resulting from changes within consideration sets rather than changes in default good. The learning effects are present, and surprisingly, there is a difference in consumer behavior. The ones at the fault of a claim tend to switch significantly less than those who suffered a third-party induced claim compared to other causes.

JEL: D12, D83, G4, G52

Keywords: consumer behavior, learning, switching, insurance claims

The public research seminars of the Department of Economics and Finance (DEF) at Tallinn University of Technology  usually take place on the second and fourth Wednesdays of the month in both onsite and online format, unless announced otherwise. The presentation will last approximately 45 minutes followed by 15 minutes of discussion. The seminars are held in English. Copies of the paper are usually made available at the seminar. The DEF seminar series is organised in collaboration with the project ”Individual Behaviour and Economic  Performance: Methodological  Challenges and Institutional Context” (IBEP), which has received funding from the European Union’s Horizon 2020 Research and Innovation programme under Grant Agreement No 952574. Questions about the seminar can be sent to the IBEP seminar coordinator Kadri Männasoo, kadri.mannasoo@taltech.ee.