Enhancing motor insurance underwriting through educational and occupational metrics

Abstract

Traditional motor insurance pricing relies on demographic proxies to assess risk. These methods often fail to capture individual nuances namely, risk appetite. This research delves into past literature from sociology, psychology, and behavioural economics to establish a grounding of behavioural theory and decision making processes. The ultimate goal is to establish whether educational level, proxied by occupation, can serve as an effective approximator for driving behaviour, claims frequency, and claims severity. A dataset from Maltese insurers was used for the statistical analysis between the above mentioned factors where several statistical techniques were applied to assess correlations between education and claims outcome. The findings do suggest some correlations and associations, however they are not as statistically significant as the ones observed in other countries. This study aims to enrich current literature associated with decision-making and risk appetite within the insurance industry, through thorough review of interdisciplinary literature.