Insurance law and incomplete contracts

Droit de l'assurance et contrats incomplets

Jean-Marc Bourgeon and Pierre Picard

Post-Print from HAL

Abstract: We analyze how insurance law can mitigate moral hazard by allowing insurers to reduce or cancel coverage in some circumstances. We consider an incomplete contract setting in which the insurer may obtain information related to the policyholder's behavior through a costly audit of the circumstances of the loss. Court decisions are based on a standard of proof such as the balance of probabilities. We show that an optimal insurance law brings efficiency gains compared to the no‐audit case. We also highlight the conditions under which the burden of proof should be on the insured, provided that insurers are threatened with sanctions for bad faith.

Keywords: Law and Economics; Insurance; Moral Hazard; Incomplete contract; Risque; Contrat assurance; Information incomplète; Hasard moral; Droit -économie (search for similar items in EconPapers)
Date: 2020-12
References: Add references at CitEc
Citations:

Published in RAND Journal of Economics, 2020, 51 (4), pp.1253-1286. ⟨10.1111/1756-2171.12356⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Insurance law and incomplete contracts (2020)
Working Paper: Insurance Law and Incomplete Contracts (2019)
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:hal:journl:hal-03084187

DOI: 10.1111/1756-2171.12356

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().