Insurance under- and over-performance: The case of comprehensive car insurance in Poland

Insurance is based on specific assumptions, including a "perfect performance" model. The principle of indemnification, mentioned in almost all insurance textbooks for non-life insurance, is nevertheless far more complicated than economists' perception. This complexity is a consequence of actuarial fairness and legal rules often being violated in practice. Thanks to the development of the methodology, the assumption of perfect performance has never been closer to reality. If we add the consumer's perspective, the outlook of insurance performance becomes interesting. The paper examines assumptions related to the performance of insurance contracts made as part of economic insurance models, namely the legal indemnification principle and the theoretical concept of uncertain indemnity, both seen from a consumer's angle. The discussion further relates to the concept of probabilistic insurance. The main goal is to measure under- and overperformance of insurance coverage. This paper invokes many qualitative and quantitative studies performed since 2012 to find evidence of the subjective perspective of under- and overperformance and full performance, within non-life voluntary comprehensive car insurance. Detailed research on comprehensive car insurance in Poland revealed the simultaneous presence of full performance, under- and overperformance. This phenomenon is known to practitioners, but its scale is unknown. A statistically significant difference exists between the more likely underperformance and the less likely overperformance. Underperformance is an outcome of inadequate coverage. 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 of policyholders.