Planning and Budgeting

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While many studies have been conducted regarding the analysis and risk assessment in the insurance, less attention has been paid to cognitive and objective aspects of uncertainty concept. The role of insurance companies to cover existing uncertainty in the framework of legal contracts can be crystallized. Thus, the measurement unit of dealing between insurer and insured is transaction. Imperfect and asymmetric information, in the form of bounded rationality, the greatest contribution to the creation of transaction costs due to adverse selection and moral hazard. Transaction cost economics approach, which is based on the new institutional economics approach, is the method for explication, analyzing, and prescription to reduce transaction costs (due to formal and informal institutions) and consequently the associated risks. There is much evidence that can be through deep underastanding of transaction cost concept and institutional factors, much of the relevant risks identified and the stability controled and managed. In addition, the role of government institution in risk management, in terms of Sovereign duties, Legislation and Policy in reducing transaction costs in downstream entities has fundamental importance. Therefore, risk management structure can be designed and organized based on transaction cost economics approch associated with Standard risk assessment system, can be designed and organized.

Keywords: : Insurance, Transaction Cost Economics, Institution, Risk Management, Moral Hazard.

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