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Paper Information

Journal:   TAHGHIGHAT-E-EGHTESADI   FALL 2012 , Volume 47 , Number 3; Page(s) 165 To 184.
 
Paper: 

A STUDY ON ADVANTAGEOUS SELECTION IN CAR COLLISION INSURANCE AND ITS IMPACT ON RATE-MAKING IN IRANIAN INSURANCE INDUSTRY

 
 
Author(s):  MAHDAVI GHADIR*, RAJAEI MALIHE
 
* FACULTY OF ECONOMICS, ALLAMEH TABATABAI UNIVERSITY
 
Abstract: 

The conventional theory of adverse selection is not supported by most of the empirical works. These studies conclude that low-risk individuals demand more insurance services than high-risks. They refer to this situation as advantageous selection theory. This theory states that loss ratio of insureds may be lower than the population loss ratio while the conventional theory of adverse selection claims the reverse. under the assumptions of theory of advantageous selection, insurers end up with relatively low-risk individuals and the selection effect will be propitious to insurers as more risk-averse low-risk individuals are not only willing to pay more for precautionary efforts but also are more inclined to insure.
This paper examines the presence of advantageous selection in the Iranian Car collision insurance market and concludes that there exists considerable advantageous selection behavior in this market.

 
Keyword(s): ASYMMETRIC INFORMATION, ADVERSE SELECTION, ADVANTAGEOUS SELECTION, UNCERTAINTY, CAR COLLISION INSURANCE
 
References: 
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