Original Research Paper
Economics of finance / insurance
Farinaz Aghaei; Mohammad-Ali Eghbali; Morteza Rasti-Barzoki
Abstract
BACKGROUND AND OBJECTIVES: Collaboration between governments and insurance companies is a crucial issue in optimizing insurance services and relevant macroeconomic policymaking. Currently, key decisions such as pricing, discount strategies, and service levels significantly influence the profitability ...
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BACKGROUND AND OBJECTIVES: Collaboration between governments and insurance companies is a crucial issue in optimizing insurance services and relevant macroeconomic policymaking. Currently, key decisions such as pricing, discount strategies, and service levels significantly influence the profitability of insurance companies, customer satisfaction, and alignment with government interests. These decisions can benefit both governments and insurance companies, thereby creating better conditions for customers. Despite numerous studies on cooperation frameworks and economic games, less attention has been given to comparing and analyzing Nash and Stackelberg game structures in joint decision-making between governments and insurance companies. This research aims to analyze this collaboration using economic game frameworks and simulate interactions between governments and insurance companies. The study specifically focuses on determining optimal discount levels and pricing strategies that can maximize the profitability of insurance companies and customer satisfaction. In other words, the goal of this research is to demonstrate how effective and coordinated collaboration between governments and insurance companies can lead to more optimal results compared to independent decision-making within the Nash game framework.METHODS: This study employed a backward induction methodology to dissect the complexities of the interactions between insurance companies and the government. The analytical process began with a detailed examination of the insurance companies' strategic decision-making. This initial phase was grounded in the assumption that the insurance companies operate autonomously and concurrently, engaging in independent decision-making processes. To model this scenario, the Nash game framework was utilized. This framework allowed for a rigorous analysis of the companies' behaviors under the circumstances of simultaneous and independent strategic choices. The outcomes and insights derived from this Nash game analysis served as crucial inputs for the subsequent stage of the research. Building upon the foundation established by the Nash game, the study then progressed to analyze the relationships within a Stackelberg game structure.FINDINGS: The study's results clearly distinguished the differing outcomes generated by the Nash and Stackelberg game structures. Within the Nash game environment, companies operated autonomously, each prioritizing the maximization of their profits. This independent pursuit, however, led to outcomes that were demonstrably less efficient overall. Conversely, the Stackelberg game structure, characterized by a coordinated approach involving both the government and insurance companies, yielded notably superior results. Specifically, the optimization of discount levels implemented under the Stackelberg framework had a positive impact, increasing the profitability for both the participating insurance companies and the government entities involved. Furthermore, the numerical analyses conducted provided additional support for these findings. These analyses clearly illustrated that enhanced coordination between the government and insurance companies proved effective in reducing the ultimate cost of insurance policies for consumers. This reduction in costs, in turn, led to a considerable and statistically significant increase in the levels of satisfaction reported by customers. The Nash game's lack of coordination created suboptimal financial results for all the parties, while the Stackelberg approach allowed for a mutually beneficial outcome. Customer satisfaction was directly linked to the coordinated efforts to lower insurance costs.CONCLUSION: The findings strongly suggest that when governments and insurance firms coordinate their policies and actions, they can unlock more favorable outcomes than if they operate in isolation, each pursuing their self-interest without considering the other's actions. The implementation of carefully designed discount strategies emerges as a key driver of success, not only enhancing the financial performance of both the government and the insurance companies but also leading to increased customer satisfaction. These optimal discount strategies effectively lower the overall cost of insurance services for customers, making insurance more accessible, inclusive, and affordable. By reducing the financial burden on policyholders, these strategies contribute to a more positive perception of insurance and improve the overall customer experience. Therefore, policymakers are strongly encouraged to prioritize the adoption of coordinated decision-making frameworks in the formulation and implementation of macro-level insurance strategies. Furthermore, they should pay closer attention to the determination of optimal discount levels, as these discounts play a crucial role in achieving a delicate equilibrium between the profitability of insurance operations and the level of satisfaction experienced by customers. Striking this balance is essential for fostering a sustainable and beneficial insurance ecosystem that serves the interests of all stakeholders, including the government, insurance companies, and the insured population.
Original Research Paper
Future research in the insurance industry
Mohammad Hosseinzadeh; mojgan Safa; mohammad hasan Maleki; seyyed abbas Borhani
Abstract
BACKGROUND AND OBJECTIVES: The insurance industry, as one of the fundamental pillars of a country's financial system, plays a vital role in ensuring economic stability, reducing unpredictable risks, and supporting both individual and collective investments. Through the provision of diverse insurance ...
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BACKGROUND AND OBJECTIVES: The insurance industry, as one of the fundamental pillars of a country's financial system, plays a vital role in ensuring economic stability, reducing unpredictable risks, and supporting both individual and collective investments. Through the provision of diverse insurance services, this industry has created a suitable platform for mitigating the impacts of incidents and hazards, and as such, it has consistently been recognized as an effective instrument in enhancing the economic resilience of societies. However, in recent decades, the insurance industry—both globally and particularly in Iran—has faced extensive transformations, primarily driven by environmental, technological, economic, social, and institutional factors. The emergence of new technologies such as artificial intelligence, the Internet of Things (IoT), big data, and blockchain, along with shifts in consumer behavior, the rise of insur-techs as emerging market players, and the introduction of new regulatory requirements and frameworks, have contributed to an increasingly complex and uncertain outlook for the industry's future. In this context, identifying and analyzing the key driving forces that influence the future of the insurance industry and prioritizing them has become an essential requirement for formulating strategic policies and designing effective, future-oriented scenarios. The main objective of this study is to identify, analyze, and prioritize the key drivers shaping the future of Iran’s insurance industry, with a focus on potential opportunities and challenges to present an evidence-based picture of the trends influencing the industry's trajectory.METHODS: The research adopted an applied approach in terms of its objective. Methodologically, it was quantitative and forward-looking (prospective). To achieve the research goals, a combination of two quantitative methods was employed: the Fuzzy Delphi method and the MARCOS multi-criteria decision-making method. This study was designed and conducted in three sequential stages.FINDINGS: In the initial stage, an exhaustive list of driving forces affecting the future of the insurance industry was compiled. This was achieved through a comperensive review of prior reseach, analysis of insurance industry reports, and structured interviews with key experts. In this phase, 33 distinct drivers were identified and systematically categorized into seven principal groups: economic, socio-cultural, technological, environmental, legal, governance-related, and structural. In the subsequent stage, the Fuzzy Delphi method was utilized to effectively screen and pinpoint the most critical drivers. A questionnaire, rigorously designed based on fuzzy logic, was developed and disseminated to a carefully selected panel of experts. The participants in this phase comprised three primary stakeholder groups within the insurance industry: senior managers and specialists from insurance companies, expert consultants in insurance and technology, and academic faculty members with research backgrounds in futures studies. A purposive and judgmental sampling strategy was employed, with selection criteria encompassing subject-matter expertise, parrentinent professional experience, and a deep familiarity with future-oriented trends in the insurance sector. Following a meticulous analysis of the fuzzy data collected from expert opinions, eight of the initial 33 drivers were conclusively identified as the most critical forces influencing the future of the insurance industry, based on their demonstrated high impact and significant levels of uncertainty. In the final stage, these eight key drivers underwent further evaluation and systematic prioritization using the MARCOS multi-criteria decision-making technique. The results unequivocally revealed four top-priority drivers: first, collaboration models between insurance companies and insurtechs: These models are pivotal for enhancing innovation and efficiency through the synergy of technological capabilities and traditional resources. second, the extent of big data utilization and data-driven analytics: This involves its application to both strategic decision-making and the innovative design of insurance products. third, the pervasive penetration of emerging fourth-generation technologies: This includes technologies such as the Internet of Things (IoT) into daily life and business operations, leading to fundamental transformations in risk assessment, pricing mechanisms, and post-sale services. Fourth, regulatory policies and frameworks in the field of technology: These policies play a decisive role in either facilitating or impeding innovation within the industry. Due to their profound transformative nature, these drivers are of paramount strategic importance for scenario planning and must be meticulously considered in shaping the future trajectory of the insurance industry.CONCLUSION: Based on the research findings, several practical recommendations were proposed to capitalize on upcoming opportunities and address potential challenges. These suggestions are based on the focus group interview method: developing collaborative platforms between traditional insurance companies and insurtechs to enhance innovation and agility; making effective investments in information technology infrastructure and advanced data analytics; formulating and implementing educational policies to improve digital literacy among policyholders and employees; and revising laws and regulations in a way that not only supports technological innovation but also safeguards the rights and interests of policyholders. By presenting a roadmap of the key driving forces shaping the future of Iran's insurance industry, this study offers a solid foundation for strategic decision-making, scenario-based planning, and enhancing the preparedness of policymakers, managers, and other stakeholders in the face of forthcoming changes.
Original Research Paper
Financial / Applied Mathematics
Asma Hamzeh; Mohammad Javad Nadjafi-Arani
Abstract
BACKGROUND AND OBJECTIVES: Insurance fraud presents a persistent challenge within the insurance industry, leading to substantial financial losses and eroding public trust. Financial institutions are actively seeking accurate methods to identify the activities of fraudsters and scammers. Due to its direct ...
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BACKGROUND AND OBJECTIVES: Insurance fraud presents a persistent challenge within the insurance industry, leading to substantial financial losses and eroding public trust. Financial institutions are actively seeking accurate methods to identify the activities of fraudsters and scammers. Due to its direct effect on serving the clients of institutions, this will lead to the reduction of operating costs, gaining the trust of other insurers, and maintaining and improving the market share of insurers as reliable financial service providers. One of the most prevalent forms of fraud occurs in auto insurance, where organized and opportunistic fraudulent activities are rampant. Fabricated accidents, especially those involving groups, staged injuries, and orchestrated scenes, are among the common fraudulent practices in this realm. Opportunistic fraud is typically committed by an individual who simply seizes an opportunity to inflate a claim or receive an exaggerated estimate for damages or repairs from their insurance companies. In contrast, professional fraud is often carried out by organized groups. These rings typically target multiple fake identities, organizations, or even brands. These criminal networks frequently rely on insiders to help them defraud companies, simultaneously using various schemes. Although the amounts involved in professional fraud cases are much larger, they occur less frequently than opportunistic insurance fraud. Combating insurance fraud is a challenging issue. Most traditional systems can detect opportunistic fraud; however, due to the significant financial losses involved, insurance companies are particularly focused on identifying organized fraud rings. Consequently, insurers need to adopt advanced technologies and sophisticated systems to effectively address this problem.METHODS: Network analysis is a valuable technique for fraud detection, enabling the evaluation of communications among individuals and entities (both real and legal) to uncover new dimensions of these interactions. This paper introduces a mathematical model, based on graph theory, to identify suspicious clusters associated with organized fraud. A network, termed the “accident network,” was first introduced using graph theory in this research. This network demonstrates characteristics of a random graph. Subsequently, suspicious clusters within this network are identified using a graph theory-based algorithm. The occurrence probability of such clusters in a random accident network is then examined by defining a binomial distribution over its edges.FINDINGS: This process assigns a label (indicating fraudulent or non-fraudulent) to each accident and individual involved. Given the algorithm's structure and complexity, the proposed method is capable of efficiently analyzing large datasets.CONCLUSION: Insurance fraud is an act committed to defraud insurers for financial gain. Insurance fraud has existed since the formation of commercial enterprises and has so far imposed billions of dollars in costs on insurance companies annually. Insurance fraud comes in various forms and occurs in all insurance domains, covering a wide range of claims from exaggerated ones to fabricated accidents and damages.Auto insurance fraud, particularly the organized fraud studied in this research, is often carried out through group structures. This structure leads to significant cost increases for insurers and consequently higher insurance premiums. Today, given the necessity of fraud detection in various fields, data mining and machine learning techniques such as artificial neural networks, fuzzy logic, and genetic algorithms have become common tools for fraud detection due to their high capabilities in modeling and navigating complex problems.Another tool used for detecting organized fraud is graph theory. In this approach, the problem is first mathematically modeled. This means the accident network is first modeled as a graph, and then organized fraud is detected using available tools. Then, computer science concepts are utilized to more precisely identify networks suspected of fraud. More accurately, in structures like a country's accident data, the amount of available data is very large finding relationships among them is quite difficult.While using tools like data mining, machine learning, neural networks, fuzzy logic, genetic algorithms, etc., whose main purpose is to find relationships among data, is very useful, they have some shortcomings. These tools, if meta-heuristic algorithms are used, will have inaccuracies or overfitting in imbalanced data. In heuristic algorithms, finding relationships among large amounts of data has very high computational complexity, which in some cases may take weeks or more to execute.In this research, the researchers have tried to address this shortcoming using mathematical models while accurately examining the probability of suspicious events. Therefore, in this research, first, the accident network was modeled using graph theory, and then it was shown that this model is a random process, and the presence of regular elements in the model indicates sets of vehicles suspected of fraud. Subsequently, based on an algorithm for finding suspicious subgraphs written as an m-file script in MATLAB, suspicious vehicles were extracted from all vehicles.Finally, it was proven that the accident network is a Poisson process, and its occurrence probability can be determined. This reasoning, based on graph modeling structure, helps assign a credibility degree to each accident and each vehicle regarding suspicion of fraud. For future research, it is suggested that a more extensive network, including all stakeholders in organized fraud, should be created and examined. More precisely, the network should examine the label assignment of main beneficiaries who profit from an accident based on their profit shares. Specifically, future work should investigate labeling main beneficiaries based on their profit shares from an accident, enabling insurers to adopt tailored policies for various stakeholders (e.g., policyholders, vehicle occupants, repair shops) to reduce financial losses and restore public trust.
Original Research Paper
Insurance Companies Accounting and International Financial Reporting Standards
Tooba Haghighat; Mahnaz Molanazari
Abstract
BACKGROUND AND OBJECTIVES: International Financial Reporting Standards (IFRS) were developed to promote transparency, comparability, and financial stability in global markets by providing a common financial reporting language. Despite this, the insurance industry has traditionally lacked a unified reporting ...
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BACKGROUND AND OBJECTIVES: International Financial Reporting Standards (IFRS) were developed to promote transparency, comparability, and financial stability in global markets by providing a common financial reporting language. Despite this, the insurance industry has traditionally lacked a unified reporting standard, which has hindered transparency and comparability. IFRS 17, replacing IFRS 4, introduces a consistent, principle-based framework for insurance contract accounting. It aims to improve the reliability of financial statements by requiring uniform valuation, revenue recognition, and disclosure using current assumptions, expected future cash flows, and a risk adjustment to more accurately reflect insurance obligations. Recent research has focused mostly on the challenges of IFRS 17 implementation, such as technical complexity and readiness, but little has been said about its financial impacts, especially in developing countries like Iran. With Iran’s insurance sector still evolving and aligning with global practices, evaluating the effects of IFRS 17 is essential for regulators and stakeholders. This study investigates the impact of IFRS 17 on the financial statements of Iranian insurance companies, examining changes in revenue recognition, reserve valuation, equity levels, and profit volatility. It also considers implementation costs, training needs, and structural issues specific to Iran’s regulatory and operational context.METHODS: This research employs a qualitative approach to gain in-depth insight into industry perspectives. The study began with two focus group sessions held at the Central Insurance of the Islamic Republic of Iran and the Professional Association of the Insurance Industry. These sessions brought together senior professionals and stakeholders to discuss the implications, expected benefits, and anticipated challenges of IFRS 17 implementation. Following the focus groups, purposive sampling was used to select participants for in-depth interviews. A total of 23 experts—comprising CEOs, CFOs, accounting managers, board members, and actuaries from prominent insurance firms—were interviewed using semi-structured guides. The data collected were analyzed using thematic content analysis. This method involved systematically coding the interview transcripts, identifying recurrent themes, and organizing them into categories reflecting shared concerns, expectations, and recommendations. The rationale for using a qualitative method was to capture rich, nuanced insights from experienced professionals that might not be evident through quantitative surveys. This approach allowed the researchers to explore the underlying reasoning behind stakeholder attitudes and reactions to IFRS 17.FINDINGS: The thematic analysis produced several major findings. A key theme was the enhancement of financial reporting transparency. Participants highlighted that IFRS 17 ensures more accurate revenue recognition, improves fair value measurement of insurance liabilities, and enhances disclosure of cash flows and reserves much better. These elements improve comparability and build investor confidence. Another critical theme was risk management. The standard facilitates the early identification of onerous contracts, supports prudent reserve allocation, and requires up-to-date discounting methodologies. Such features contribute to more robust capital management, allowing companies to better align reserves with underlying risks and avoid unexpected shortfalls. Despite these benefits, several implementation challenges were noted. These include the high costs of upgrading IT infrastructure, the need for sophisticated actuarial models, and resistance to change within organizations. Participants mentioned that transitioning from legacy systems demands both financial and human resource investment. Structural consequences were also reported. For example, the use of market-based discount rates tends to increase the present value of liabilities, leading to reduced equity and shifts in profitability timing. This has significant implications for investor communication and performance metrics, particularly in the early years of adoption. Overall, the standard was perceived as a driver of long-term improvement. Benefits include reduced earnings volatility, enhanced measurement of insurance obligations, and improved clarity in financial notes. Participants agreed that IFRS 17 sets a solid foundation for aligning Iranian insurers with global best practices.CONCLUSION: The results indicate that IFRS 17 introduces transformative changes to the financial reporting landscape of the Iranian insurance industry. Standardizing key accounting practices improves transparency, risk management, and strategic planning.While initial implementation may be costly and disruptive, the long-term advantages—such as enhanced market confidence, regulatory alignment, and investor attractiveness—are substantial. For effective execution, stakeholders should prioritize training, upgrade their accounting infrastructures, and engage actively with regulators. Support from regulatory bodies such as the Central Insurance of Iran will be vital in overcoming resistance and ensuring consistency in application. If properly implemented, IFRS 17 can significantly enhance the credibility and global competitiveness of Iranian insurance firms, laying the groundwork for a more trustworthy and resilient financial system.
Original Research Paper
Future research in the insurance industry
mahdi gholamizare; Amir Mansour Tehranchian; Ahmad Jafari Samimi
Abstract
BACKGROUND AND OBJECTIVES: The present study was conducted with the primary objective of identifying, analyzing, and explaining the key macroeconomic factors that influence the performance of Iran's insurance industry. By examining a range of economic indicators and their dynamic interactions with the ...
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BACKGROUND AND OBJECTIVES: The present study was conducted with the primary objective of identifying, analyzing, and explaining the key macroeconomic factors that influence the performance of Iran's insurance industry. By examining a range of economic indicators and their dynamic interactions with the financial outcomes of insurance firms, this research aims to provide a comprehensive understanding of how broader economic conditions shape the profitability, growth, and stability of the insurance sector in Iran.METHODS: This study analyzes seasonal data spanning from 1390 to 1401 (according to the Iranian calendar), focusing on the performance dynamics of the insurance industry within the context of the Iranian economy. The statistical population includes all companies listed on the Tehran Stock Exchange (TSE), ensuring comprehensive coverage of relevant market participants. The main objective of this research is to evaluate and quantify the impact of various macroeconomic and industry-specific factors on the performance of the insurance sector. To achieve this, the Structural Vector Autoregression (SVAR) model is employed, allowing for the identification and estimation of structural shocks and dynamic interactions among variables over time. The model is estimated using EViews 12 software, which facilitates a robust econometric analysis. The findings of the study provide valuable insights into the intensity and direction of influence of different factors, offering practical implications for policymakers, investors, and insurance managers in their strategic decision-making processes.FINDINGS: The findings of the study reveal that a government’s spending shock leads to a short-term increase in the profitability of the insurance industry, with an initial rise of approximately 0.2% lasting until the second period. This effect undergoes adjustment in the third period and remains positive from the fourth to the seventh period, eventually stabilizing at a neutral level in the subsequent periods. Shocks related to the money supply and unemployment rate demonstrate a volatile pattern with no clear long-term direction, ultimately exerting a neutral effect on profitability. In contrast, fluctuations in economic growth display an oscillatory and gradually diminishing influence, which eventually converges to a neutral state. The impact of inflation changes is largely neutral across all periods. However, tax revenue and exchange rate shocks show significant oscillating effects on profitability.The results of variance decomposition further highlight the differential influence of these shocks over various time horizons. In the short term, tax revenue shocks account for approximately 23% of the variability in insurance industry profitability. Over the long term, a government’s spending shocks become more dominant, explaining around 30% of profitability fluctuations. Moreover, economic growth shocks contribute meaningfully in the medium to the long term, accounting for about 12% of the variation in profitability. These findings underscore the importance of fiscal and macroeconomic policies in shaping the performance dynamics of the insurance sector in Iran.CONCLUSION: The findings of this research underscore the importance of adopting a balanced and forward-looking approach to government spending. While fiscal expansion can temporarily boost the profitability of insurance companies—particularly in the short run—its diminishing effect over time indicates that without structural reforms and prudent budgeting, such policies may lose their effectiveness. Therefore, sustainable and strategically targeted fiscal policies are essential for maintaining long-term stability in the insurance sector.Furthermore, the study highlights that changes in money supply have minimal and inconsistent effects on insurance profitability. This suggests that fluctuations in monetary variables may introduce uncertainty rather than provide clear benefits. Hence, ensuring stability in monetary policy, particularly in controlling interest rates and managing liquidity, is crucial for creating a predictable financial environment in which insurance companies can operate effectively. Macroeconomic shocks related to unemployment and economic growth demonstrate short-term positive impacts; however, their long-term influence tends to be neutral or erratic. This finding implies that while temporary economic improvements may support insurance performance, sustained profitability depends on broader and more consistent economic development strategies. Although inflation does not appear to significantly affect profitability in the period analyzed, controlling inflation remains a vital priority. Price stability contributes to maintaining the real value of insurance products and premiums, enhancing consumer trust and long-term planning capabilities within the industry. Tax revenues were found to be a significant factor in short-term profitability shifts. As such, stable and transparent tax policies are essential to avoid unintended disruptions in the financial performance of insurance firms. Policymakers should aim for a tax environment that encourages investment and long-term planning within the sector. Exchange rate volatility poses another challenge, particularly in an increasingly globalized economic environment. Insurance companies should adopt more robust foreign exchange risk management strategies to shield themselves from currency-related losses and maintain financial resilience. Lastly, the research emphasizes the critical role of internal financial management. Long-term profitability is not solely determined by external macroeconomic conditions, but also by the efficiency and competence of internal operations. Investing in workforce development, financial training, and strategic planning will help insurance companies adapt more effectively to changing economic conditions and enhance their overall resilience.
Original Research Paper
Insurance rights
Mohammad Taqi Rafiei; reihaneh nadjarzadeh
Abstract
BACKGROUND AND OBJECTIVES: In the complex realm of legal relations, mutual obligations among individuals have always been a focus for legal scholars. One such obligation, which has undergone profound transformations over time, is policyholders’ duty to mitigate loss. This duty originates from principles ...
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BACKGROUND AND OBJECTIVES: In the complex realm of legal relations, mutual obligations among individuals have always been a focus for legal scholars. One such obligation, which has undergone profound transformations over time, is policyholders’ duty to mitigate loss. This duty originates from principles like good faith and the necessity of cooperation between parties in an insurance contract. Initially, it had an optional and contractual nature and was only considered in certain insurance branches, such as marine transport insurance. However, economic and social developments, including increased insurance costs and the need to preserve and manage the financial resources of insurance companies, have transformed this duty from a contractual obligation into an implied and enforceable duty across all insurance branches. This change has not only affected the relationship between the insurer and the insured but also been accepted as a fundamental pillar in insurance contracts, significantly contributing to the efficiency of the insurance industry and global trade. The main goal of this study is to answer the fundamental question: what effects and enforcement guarantees does it have on the relationship between the insurer and the insured? A precise understanding of this duty is particularly important for decision-makers in Iran, as a lack of sufficient awareness can lead to indifference and, ultimately, to increased trade risk and reduced investment. Standardizing this duty and correctly including it in sample documents and draft contracts can play an effective role in the growth of the insurance industry and in developing commercial investments.METHODS: This research employs an analytical-descriptive approach, examining the duties of the insurer and the insured in the legal system of Iran and some other countries. Data collection in this research was conducted using a library method, and judicial rulings and practical case studies have also been perused.FINDINGS: This research's findings indicate that the insured's duty to mitigate loss has evolved from an optional right into a legal obligation. The right to reimbursement for loss mitigation expenses is the insured's primary right after performing the duty. This right is recognized in practice, whether implicitly or explicitly stated in insurance policies. In cases involving multiple insurance policies, each insurer is responsible for reimbursement proportionate to their shares in the benefits of loss mitigation. The first example of a pursuit and action clause in its approximate current form appeared in English insurance policies. Pursuit and action were initially a right, not an obligation, but gradually it took on the nature of an obligation, and its scope expanded to the point before the damage occurred. The first and main right of the insured after the obligation is the right to reimbursement. In the case of negligence in the performance of the obligation, the circumstances of the case determine the guarantee of its performance. In general, in insurance, when the insured seeks to recover their damage, they must first prove that they have already suffered damages. Second, the damage was caused by a risk covered by the insurance. Third, the insured was healthy when the insurance coverage began. So, the burden of proof is initially on them.CONCLUSION: Finally, by wrapping up the content and analyzing the research findings, we conclude that the insured's duty to mitigate loss is currently accepted as a fundamental pillar in insurance contracts and is a necessary condition for the insured's entitlement to compensation. Non-compliance with this duty can lead to a reduction or even the extinguishment of the insurer's obligation for compensation. This duty not only helps preserve the insurer's interests but also contributes significantly to the efficiency of the insurance industry and the reduction of unnecessary and cascading losses by encouraging the insured to take reasonable measures to prevent and mitigate risks. Despite its implied nature, the explicit inclusion of this duty is common in prevalent commercial insurance policies, and it continues to receive attention in authoritative academic texts. In the context of domestic trade and Iranian insurance companies' policies with Iranian businesses, due to the disregard for this duty and the lack of attention to its capacities, we observe an incomplete legal basis without enforcement guarantees, a pervasive silence regarding the duty in directives and resolutions of decision-making authorities, and ultimately, negligence in the correct inclusion of the relevant clause in insurance policies. This systemic issue, on a macroeconomic scale, significantly increases commercial risks, from transportation to engineering projects, and inevitably leads to substantial economic losses and a demonstrable reduction in domestic and foreign investment. Therefore, a profound understanding and the diligent, accurate implementation of this duty are essential, indeed indispensable, steps towards the sustained development and long-term stability of the insurance industry and the comprehensive support of commercial activities throughout the country.
