Economic Analysis of Barriers to Efficiency of Insurance Contract with Emphasis on Solutions of Iranian Insurance Law

Insurance is an important economic institution which via risk sharing and mitigation brings growth and prosperity for the society. However, some factors might make the insurance to lose its efficiency and consequently the insurance market and economy would fail. The most important reasons for this failure include: adverse selection, reverse adverse selection, moral hazard and reverse moral hazard, all of which stem from dual information asymmetry before and after conclusion of contract. The law can play an important role in controlling these barriers of efficiency that this article has reasoned –with emphasis on Iranian law- that law-making could prevent market failure resulting from the above impediments.