The purchase of insurance may cause the insureds to increase the costs of insurance companies, compared to their estimation of costs. If after the demand of insurance services, the loss ratio of insurance companies increases because of consumer behavior, moral hazard will be evident.
In this paper, after introducing the literature, the presence of moral hazard in Iran Insurance Company is tested via a non-parametric method.
We assess the relationship between the value of cars and purchase of collision insurance in order to test for existence of moral hazard. If the percentage of low value cars in bottom quantiles among purchasers of collision insurance is high, the hypothesis of non-existence of moral hazard is rejected. Our study shows the hypothesis of non-existence of moral hazard is rejected. In other words, a considerable fraction of low value car owners purchased collision insurance. We conclude that there exists moral hazard phenomenon in Iranian car insurance market.
JEL Classifications: G22, D82, D41
Mahdavi, G., & rostamian, M. (2011). Tests for the Presence of Moral Hazard in Iranian Car Insurance Market (The case of Iran Insurance Company). Journal of Economic Research (Tahghighat- E- Eghtesadi), 46(4), 265-280.
MLA
Ghadir Mahdavi; maryam rostamian. "Tests for the Presence of Moral Hazard in Iranian Car Insurance Market (The case of Iran Insurance Company)", Journal of Economic Research (Tahghighat- E- Eghtesadi), 46, 4, 2011, 265-280.
HARVARD
Mahdavi, G., rostamian, M. (2011). 'Tests for the Presence of Moral Hazard in Iranian Car Insurance Market (The case of Iran Insurance Company)', Journal of Economic Research (Tahghighat- E- Eghtesadi), 46(4), pp. 265-280.
VANCOUVER
Mahdavi, G., rostamian, M. Tests for the Presence of Moral Hazard in Iranian Car Insurance Market (The case of Iran Insurance Company). Journal of Economic Research (Tahghighat- E- Eghtesadi), 2011; 46(4): 265-280.
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