Economic Criteria for Compulsory Insurance&ast

Michael G Faure ()
Additional contact information
Michael G Faure: Metro, Universiteit Maastricht, Postbus 616, Maastricht 6200 MD, The Netherlands.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2006, vol. 31, issue 1, 149-168

Abstract: This paper applies the economic analysis of law through the question of under what conditions should insurance be made compulsory. A distinction is made between first-party (victim) insurance and third-party (liability) insurance. It is argued that under some circumstances compulsory victim insurance may be indicated, for example, when information problems or externalities arise. The major argument in favour of compulsory liability insurance is insolvency of the potential injurer. His insolvency may lead to underdeterrence. This can be cured through making the purchase of insurance compulsory. However, equally a few limits and warnings with respect to the introduction of a duty to insure are presented. If the moral hazard problem cannot be cured or if insurance is not sufficiently available, making insurance compulsory may create more problems than it cures. Also, it is argued that a major disadvantage of compulsory insurance is that it may make governments too dependent on the insurance market. The Geneva Papers (2006) 31, 149–168. doi:10.1057/palgrave.gpp.2510063

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.palgrave-journals.com/gpp/journal/v31/n1/pdf/2510063a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/gpp/journal/v31/n1/full/2510063a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:gpprii:v:31:y:2006:i:1:p:149-168

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().