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|Other Titles:||Incentive of Risk Control, Tort Law and Liability Insurance for the Public Premises|
|Issue Date:||2016-12-12 16:44:43 (UTC+8)|
The public policy maker plans to implement the compulsory liability insurance with strict liability principle to provide the compensation for the injured in the public premises and to enhance the safety care taken by the firm. However, the availability and affordability of private liability insurance has been a serious problem in the insurance market since 1980's. The fundamental solution of public safety is to improve the risk control activities by the firms.This paper provides theoretical analysis of the effect of legal system (negligence rule vs. strict liability) and compulsory liability insurance on the incentive of safety care. The major findings of this study are: (l) the incentive of safety care of the firm is decided by the relative expected cost of risk control program to the expected benefit of damage reduction, instead of the liability rule of tort law; (2) the intervention of compulsory liability insurance will not encourage the incentive of safety care unless the premium rate is structured unfairly to make extra penalty on the high-risk insured; (3) when there is uncertainty in causation and/or claim settlement, strict liability law will not encourage the safety care but discourage the firm from attending the business, while the safety care is increased under negligence rule and the expected utility of attending business may be unchanged, increased, or decreased depending on the cost of risk control activities.
|Appears in Collections:||[Issue 78] Journal Articles|
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