Events at CERGE-EI

András Kiss

Central European University, Budapest, Hungary

Author: András Kiss

Abstract: I estimate the effect of a consumer awareness campaign on contract switching decisions in auto liability insurance, and show that consumers’ ignorance can be a major obstacle to switching service providers.  For identification, I exploit a recent change in Hungarian regulation, which creates exogenous variation in the salience of the switching opportunity for a subset of drivers. Using a micro-level dataset, I find that the campaign increases switching rates by 12 percentage points from a baseline of 20 percent. I also jointly estimate switching costs and consumer inattention in a structural model, showing that a quarter of insurees only consider switching because of the campaign, whereas almost half of them completely ignore the decision.

Full Text:  “Salience and Switching”