Monday, April 21, 2008

Banks and Lemmings

There are times its seems that the banks make lemmings look like rugged individualists. First they all rush into sub-prime lending offering buy-one-get-one-free mortgages, then oops, there's an unseemly rush to impose stricter lending criteria and push up lending rates. Then again, maybe I'm being unfair to lemmings ...

I don't think we'll be hearing a lot from banks and financial institutions about innovation for a while to come, which is a pity really. There are some valuable insights from behavioural economics that could provide the basis of better banking products. Or, in one recent example I came across, better car insurance products. The idea is called Pay As You Drive (PAYD) and some US car insurers are already offering it. You install a recording device that measures accurately the number of miles you drive (and your speed) and your car insurance premium is calibrated accordingly. A win-win for consumers, for the environment, and for the health service (discouraging unnecessary driving reduces the potential for road accidents).

Any individualist lemmings out there willing to try it in Ireland?

1 comment:

  1. Another nice car insurance product is one where you agree not to drive during certain times, which is attractive for segments like young make drivers who can agree to stay off roads during periods with higher rates of accidents for lower premiums


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