Experimental Evidence on the Impact of Telematics Devices on Welfare

In a behavioral experiment with around 500 participants, we measured the willing- ness of insurance policyholders to pay for a telematics contract. We find that there are significant welfare costs associated with digital monitoring for which individuals need to be compensated. Our results suggest that digital monitoring causes a reduction in the willingness to pay (WTP) which is in the range of 25 to 50 percent of the expected loss. Our findings set a benchmark for the demand-side costs of telematics con- tracts that need to be contrasted with the benefits of using this technology.