Should regulation help ‘lazy’ customers? – Regulation alternatives on the Hungarian third-party motor liability market

Abstract:

This paper presents the operation of the Hungarian third-party motor liability market and investigates, with a model, whether price competition regulation coming from a special regulation and the existing market situation (valid until 2012) is to be suggested. Should the regulator prohibit price discrimination, which serves to benefit versatile customers (ie who change insurance companies often) via their seeking and getting more competitive prices (at the expense of not so dynamic persons)?

Using our model, we are able to show that such a regulation might be recommended if there is competition in the market (ie many insurance companies), when most customers will not face high switching costs or someone's changing insurance company does not present any problems.