Moral hazard in insurance: Theory and evidence from a credit reform in Ghana

Francis Annan

Journal of Public Economics, 2022, vol. 209, issue C

Abstract: Helping individuals to buy insurance coverage in developing countries, for instance by allowing them to buy insurance on credit, may induce more risky behavior. 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. The estimated cost of moral hazard reach 12% of firm profits. The results have important implications for the study of market inter-linkages, bundling and credit-constraints.

Keywords: Contracts; Moral hazard; Credit; Insurance (search for similar items in EconPapers)
JEL-codes: D81 D82 G22 O12 O16 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:209:y:2022:i:c:s0047272722000354

DOI: 10.1016/j.jpubeco.2022.104633

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