Revisiting the Moral Hazard Problem: Evidence from Automobile Insurance Sector

Year 2025, Volume: 34 Issue: 2, 278 - 293, 09.10.2025

İsa Sağbaş , Naci Tolga Saruç , Ali Balkı

https://doi.org/10.26650/siyasal.2025.34.1455265

Abstract

Asymmetric information, a market failure, is frequently observed in insurance markets involving risk and uncertainty. Asymmetric information arises from moral hazard, adverse selection, and the principal-agent problem. The primary purpose of this study is to test the moral hazard in the Turkish automobile insurance sector. Determining factors affecting moral hazard is also one of the study's aims. The data used in this study were obtained from a survey conducted with policyholders in Istanbul, Izmir, and Ankara, which have the most insurance policies. According to the analysis results, the car brand affects the moral hazard level of drivers. As the intercity mileage of drivers increases, the moral hazard level decreases. The moral hazard level decreases as drivers' accidents increase during the policy period. When obtaining car insurance, drivers with complete information have lower moral hazard levels. In addition, drivers who take risks while driving have higher moral hazard levels than others. Uncertainty will be reduced if insurance companies consider the factors that cause moral hazard when determining the policy price. For this purpose, the government should regulate the automobile insurance sector. Insurance companies and car owners can make more rational decisions in this case.

Keywords

Asymmetric information , Moral hazard , Automobile insurance sector

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