The Journal of Economic Studies and Policies

The Journal of Economic Studies and Policies

Test of Asymmetric Information in the Automobile Insurance Industry of IRAN

Document Type : Original Article

Authors
Gholam Reza Keshavarz Haddad 1
Monireh Amirkhanloo 2
1 Associate Professor of Economics, Sharif University of Technology
2 Researcher of Iran Chamber of Commerce, Industries and Mines
10.22096/esp.2011.26217
Abstract
Classical theory of asymmetric information predicts a positive correlation between risk and insurance coverage. Using a sample of 69553 policyholders in Iran Insurance Company with optional items in the car’s body insurance contract, which provides significant and relevant information on the preferences of costumers, this research intends to test the prediction. Statistical tests have been conducted by the conditional independence Bivariate Probit model and Nonparametric Statistics which have been pioneered in Chiappori and Salanie (2000) and Chiappori et al (2006).The distinctive feature of the research is the use of individual data of policyholders in the oligopolistic Iran’s Insurance market. Our findings confirm realistic expectation and positive correlation in Iran’s Automobile Insurance Market (IAIM), which indicates a strict evidence of Adverse Selection or Moral Hazard in the market. These results imply inefficiency in IAIM and the existence of informationally inconsistent insurance contracts in the insurance industry of Iran.
Keywords
Automobile Insurance
Contract Theory
asymmetric information
Adverse Selection
Moral Hazard
Nonparametric Inference

  1. الف- فارسی

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