Asymmetric Information in Iran’s Insurance Market: Case Study for Automobile Insurance in Iran Insurance Company

Document Type : Research Paper

Authors

1 Associate Professor of Economics at Sharif University of Technology

2 Ph.D Student of Economics at Sharif University of Technology

Abstract

Asymmetric Information in Iran’s Insurance Market: Case Study for Automobile Insurance in Iran Insurance Company
This research aims to test the presence of asymmetric information by using the dynamic information of automobile policyholders in the Iran Insurance Company (IIC). The Conditional Independence test is conducted by Bivariate Probit model, the dynamic properties which are presented for bonus/malus system is tsted by a Dynamic Bivariate Probit model. Making use of a sample of 86637 policyholders in IIC, Our finding confirms positive correlation between risk and coverage in Bivariate Probit Model, which supports presence of asymmetric information. Also, there is a negative correlation between claim in the periods of t and t-1 in Dynamic Bivariate Probit model, where confirms that behavior of the insurance policy holders are subject to moral hazard.

Keywords

References

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History

  • Receive Date: 08 May 2014
  • Revise Date: 15 November 2014
  • Accept Date: 10 March 2015

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