The impact of the insurance on the deterrence of tort law

Deterrence is one of the main functions of tort law. Presence of insurance weakened that function and raised carelessness because the compensation by insurer not only does not deter injurer, but also may encourage him/her or others to carelessness. This impact of insurance is named ''moral hazard''. Although insurers have some instruments to reduce moral hazard, but for competition reasons, insurers use them less, but if the management would be true, moral hazard will be reduced, and as a result, the deterrence of tort law will be reinforced. Iranian Act of Compulsory Insurance for Loss of Third Party in Traffic Accident of Vehicles 2016 provided some instruments for reduction of moral hazard that includes maintaining of liability of negligent driver with insurance coverage, to consider insurer as a successor of negligent driver and determining premiums on the basis of experience rating. That instruments increase efficiency of tort law and if would be enforced truly, will lead to reduction in traffic accidents Rules of tort law impacts on its deterrence and incentives of buying policy by risk averse actors and accepting particular theory may led to reduction of deterrence and reduction or increase of welfare. For instance, acceptance of negligence rule and encouraging of injurer to buy policy will lead to increase of welfare and keep deterrence of tort law.