Commercial Automobile Insurance: Should Fleet Policies Differ from Single Vehicle Plans?
A “fleet” insurance policy covers a number of motor vehicles, usually five or more, owned by a business firm. The issue addressed in this paper is whether the design of such policies should differ from that of single-vehicle insurance plans. Specifically, I inquire whether the size of a fleet matters for the loss reimbursement schedules. The intuition is that, even over a single contract period (say a year), the loss experience for a large fleet may be expected to provide relatively precise information with respect to a firm’s risk class or risk management policies. Presumably, this should make it possible to provide better insurance coverage, while maintaining the screening of bad risks and the incentives to reduce accident frequencies.
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