Moral Hazard in Insurance: Theory and Evidence from a Credit Reform in Ghana

90 Pages Posted: 2 Oct 2019 Last revised: 3 Aug 2020

Date Written: September 12, 2019

Abstract

Helping individuals to buy insurance coverage in developing countries, for instance by allowing them to buy insurance on credit, may not necessarily be welfare improving. Using rich administrative data on auto-insurance market in Ghana, and a policy reform that led to sizable reduction in demand by disallowing individuals to buy insurance on credit, I provide non-parametric evidence for the existence of moral hazard and recover lower bounds on the costs it imposes in this market. My estimates imply the moral hazard gains reach 12% of firm profits and may largely outweigh gains in consumer surplus from the increased insurance coverage.

Keywords: Contracts, Moral Hazard, Credit, Insurance, Regulation

JEL Classification: D82, D81, G22, O12, O16

Suggested Citation

Annan, Francis, Moral Hazard in Insurance: Theory and Evidence from a Credit Reform in Ghana (September 12, 2019). Available at SSRN: https://ssrn.com/abstract=3457946 or http://dx.doi.org/10.2139/ssrn.3457946

Francis Annan (Contact Author)

Georgia State University ( email )

35 Broad St NW
Atlanta, GA 30309
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
564
rank
462,557
PlumX Metrics