Joint modelling of financial cost and carbon footprint in motor insurance claims: a BINAR(1) decision framework for circular auto parts adoption
Abstract
Motor insurance claims management increasingly faces a dual objective: controlling claim costs while reducing greenhouse-gas emissions associated with vehicle repair decisions. This paper proposes a bivariate, discrete-time modelling framework that links the dynamics of financial claims and repair-related carbon footprint inspired by a BINAR(1) dependence structure, allowing for temporal persistence, cross-dependence and a positive/negative correlation between the two dimensions. Using externally sourced emission factors and cost information for replacement parts, we operationalise the carbon footprint of claims under two repair pathways: new parts versus circular-economy reused parts (PIEC). We then conduct scenario analyses in which the acceptance rate of reused parts varies, and we quantify the joint implications for expected monetary outlays and CO 2 -equivalent emissions. Results show that higher PIEC acceptance can simultaneously reduce expected emissions and average claim cost, and the magnitude of the joint benefit depends on the dependence structure and persistence captured by the BINAR(1) process. The proposed framework provides a transparent, reproducible tool for insurers to evaluate repair-policy levers and to align claims operations with decarbonisation targets while retaining an explicit stochastic risk perspective.
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BibTeX
@misc{minier2026joint,
title = {{Joint modelling of financial cost and carbon footprint in motor insurance claims: a BINAR(1) decision framework for circular auto parts adoption}},
author = {Charles Minier and Stéphane Loisel and Renata Alcoforado},
howpublished = {arXiv},
year = {2026},
month = nov,
doi = {10.48550/arxiv.2611.09213},
eprint = {2611.09213},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2611.09213},
}
RIS
TY - UNPB
TI - Joint modelling of financial cost and carbon footprint in motor insurance claims: a BINAR(1) decision framework for circular auto parts adoption
AU - Charles Minier
AU - Stéphane Loisel
AU - Renata Alcoforado
PY - 2026
DA - 2026/11/06
PB - arXiv
DO - 10.48550/arxiv.2611.09213
UR - https://arxiv.org/abs/2611.09213
AB - Motor insurance claims management increasingly faces a dual objective: controlling claim costs while reducing greenhouse-gas emissions associated with vehicle repair decisions. This paper proposes a bivariate, discrete-time modelling framework that links the dynamics of financial claims and repair-related carbon footprint inspired by a BINAR(1) dependence structure, allowing for temporal persistence, cross-dependence and a positive/negative correlation between the two dimensions. Using externally sourced emission factors and cost information for replacement parts, we operationalise the carbon footprint of claims under two repair pathways: new parts versus circular-economy reused parts (PIEC). We then conduct scenario analyses in which the acceptance rate of reused parts varies, and we quantify the joint implications for expected monetary outlays and CO 2 -equivalent emissions. Results show that higher PIEC acceptance can simultaneously reduce expected emissions and average claim cost, and the magnitude of the joint benefit depends on the dependence structure and persistence captured by the BINAR(1) process. The proposed framework provides a transparent, reproducible tool for insurers to evaluate repair-policy levers and to align claims operations with decarbonisation targets while retaining an explicit stochastic risk perspective.
ER -