Road traffic injuries and fatalities have been an increasingly severe public health problem in China. In order to provide victims with basic financial protection, since 2006, all the vehicles ran in China are forced to be insured by compulsory third party insurance. However, according to the textbook economic model, the compulsory insurance decreases the motivation for drivers to spend care when driving due to moral hazard effect. To test whether the moral hazard effect of compulsory insurance exists in China, we empirically reviewed the data obtained from Guangdong, China by using logistic regression. Evidence supports the moral hazard effect showing that the likelihood for the insured drivers to be involved in speeding is 1.182 times higher than their uninsured counterpart in China. Also we found that the speeding probability for insured drivers decreased by 14.679% when China introduced floating premium regime.


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    Title :

    The Moral Hazard Effect of Vehicle Insurance on Road Safety in China



    Published in:

    Publication date :

    2014-04-28


    Size :

    5 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English




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