Auto Liability Claim Insurance Payouts – Does Age and Gender Make a Difference?

Automobile, as one of the most widely owned major assets by United States people, is also the prime source of personal liability. Every year more than 18,3 million accidents occurred on US roads and highway. These involving in excess of 30 million vehicles, injuring almost 3 millions and killing more than 50 thousands. This statistics is also including auto liability claims settlement both claimants and defendant drivers. Due to this big number of accident, auto liability claims settlement decisions are far reaching. There are various factors which influenced auto liability claim settlement such as the extent of the claimants’ body injury, claimant’s degree of fault in causing the accident, the rules of state negligence, and attorney involvement.

Gender Effects on Auto Liability Claim Settlement

Gender differences off course affect both risk aversion and negotiation preferences. While this always be hold true that women have greater risk aversion compare to men, women would prefer moderate payoffs with certainty to relatively higher payoff with uncertainty result. However, this uncertainty may be speculative risk at most. By nature, women will be more risk averse with respect to auto liability claims settlement as well. They are preferring certain moderate payoffs to uncertain higher payoffs. Female claimants are also being perceived as fair than maximizing economic outcome. A woman, for example, might believe that being “womanly” includes being more cautious, thus risk averse, and take actions consistent with that portrayal. We than may expect based on risk aversion and negotiation preferences, that female claimants are going to conciliate for relatively lower auto liability claims payment.

Age Effects on Auto Liability Claim Settlement

Age also play important role in deciding the outcome of auto liability insurances payout. This is particularly true that risk aversion is declining until age 60-65. This is in line with economy theory which predicts that older people will show greater financial risk due to their shorter horizon to recover from any adverse circumstances. Elderly had experienced war and economic depression which make them to value a dollar and overvalue a settlement offer relative to younger negotiators. Due to this evidence, it is expected that during auto payout negotiations, elderly claimants will accept lower auto liability claim settlements.

For young adults (less than 23 years old), they are in group of less negotiating experiences. This factors would negatively affect youthful claimants settlement compare to other factor like accident fault. In economic perspective, youth claimants with low time costs and have longer time horizons to recover for any adverse circumstance will accept extend negotiation in the offset of chance to get higher payoff.

Discrimination Effects on Auto Liability Claim Settlement

Civil law determines discrimination as different intervention of persons based on age, race, gender, religion or ethnic origin. There is an ample literature on evidence and economic favoritism in credit and the laboratory. Most literature on discrimination in insurance markets centered on race, in particular, insurance availability. The effects of discrimination on liability claims settlement, however, have not been studied elsewhere. Economic discrimination in connection with the affected persons with a taste for discrimination “is that with the taste of discrimination”. Given the extra cost for unjust prejudices in a competitive market, discrimination should eventually disappear.

There is an alternate market-based explanation known as “statistical discrimination,” which posits that evident and discriminatory characteristics are used as proxies for un-observable characteristics. The theory anticipates that discrimination will eventually disappear because agents who are able to differentiate among individuals without use of discriminatory proxies will acquire market power.

Empiric evidence, not pointed out that discrimination, but still remains in lending market and labor market. For instance, even as mortgage applicants have almost identical credit history and future income potential, an applicant of color-race is more likely to be rejected in undeniably the mortgage or will be offered a higher price. Consequently, recent studies suggest that a purely economic model is not sufficient to describe market behavior, because the decision-making is highly context-dependent. Integration of social and psychological factors is necessary considering the impact of bias on the economic results. Here we have the possibility that the risk of settings, preferences and patterns negotiations divisions and / or discrimination can explain the differences in the accounts. By sex and age as proxies, we find evidence of systematic differences in pay claims.