Answer
reduced car theft
lesser number of cars being replaced.
Work Step by Step
If one company insures all vehicles in the state, it captures 100% of the external benefit from reduced theft. Since LoJack costs $100 per vehicle per year and the benefit (fewer claims) goes entirely to the insurer, it will provide free LoJacks to at least some customers—especially those in high-theft areas—because the savings from reduced payouts can exceed the cost.
So insurance companies may be enticed to provide free loJacks to reduce theft and having to pay out for stolen cars.
