Economic Analysis of Ethiopia's Vehicle Insurance against Third Party Risks Proclamation
Alekaw Assefa Dargie, Economic Analysis of Ethiopia's Vehicle Insurance against Third Party Risks Proclamation, Hawasa University Journal of Law, Forthcoming
Posted: 3 Jan 2018
Date Written: December 29, 2017
Abstract
Road traffic casualties are major public health challenge which needs sustainable prevention. In comparison with African countries, Ethiopia has a least vehicle ownership. However, motor vehicle accident is a cause for death, bodily injury and destruction to properties in Ethiopia. Ethiopia has fatality rate of ninety five traffic car accident deaths per ten thousand vehicles. To tackle this escalating social problem, recently Ethiopia has introduced vehicle insurance against third party risks proclamation. This Article is the modest contribution to economic analysis of this proclamation. First party liability insurance is efficient in many respect, however; when first party insurance fails third party compulsory though not efficient, is introduced to serve as social insurance. It is argued that this proclamation tackles externality produced by accident risks. This Article also examines how this law devises to solve information asymmetry. Furthermore, gaps of the proclamation from law and economics approach is analyzed.
Keywords: [comma Compulsory insurance, externality, information asymmetry, risk differentiation, adverse selection, moral hazard, law and economics, risk averse, cross-subsidy, social insurance, paternalism]
JEL Classification: K12, K19, G21]
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