Insurance Under- and Over-performance: The Case of Comprehensive Car Insurance in Poland
Insurance Under- and Over-performance: The Case of Comprehensive Car Insurance in Poland

Summary/Abstract: Insurance is based on specific assumptions, including a “perfect performance” model. The principle of indem-nification, mentioned in almost all insurance textbooks for non-life insurance, is nevertheless far more com-plicated than economists’ perception. This complexity is a consequence of actuarial fairness and legal rulesoften being violated in practice. Thanks to the development of the methodology, the assumption of perfectperformance has never been closer to reality. If we add the consumer’s perspective, the outlook of insuranceperformance becomes interesting. The paper examines assumptions related to the performance of insurancecontracts made as part of economic insurance models, namely the legal indemnification principle and thetheoretical concept of uncertain indemnity, both seen from a consumer’s angle. The discussion further relatesto the concept of probabilistic insurance. The main goal is to measure under- and overperformance of insur-ance coverage. This paper invokes many qualitative and quantitative studies performed since 2012 to findevidence of the subjective perspective of under- and overperformance and full performance, within non-lifevoluntary comprehensive car insurance. Detailed research on comprehensive car insurance in Poland revealedthe simultaneous presence of full performance, under- and overperformance. This phenomenon is knownto practitioners, but its scale is unknown. A statistically significant difference exists between the more likelyunderperformance and the less likely overperformance. Underperformance is an outcome of inadequatecoverage. Furthermore, the research outcomes suggest that uncertain indemnity should not be considered“random” as there is an asymmetry toward underperformance, at least from the subjective perspective ofpolicyholders.

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