|
on Insurance Economics |
|
Issue of 2005‒12‒09
ten papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Marta Cardin (Department of Applied Mathematics-University Ca'Foscari-Venice); Graziella Pacelli (Department of Social sciences- University of Ancona) |
| Abstract: | The properties of risk measures or insurance premium principles have been extensively studied in actuarial literature. We propose an axiomatic description of a particular class of coherent risk measures defined in Artzner, Delbaen, Eber, and Heath (1999). The considered risk measures are obtained by expansion of TVar measures, consequently they look like very interesting in insurance pricing where TVar measures is frequently used to value tail risks. |
| Keywords: | Risk measures, premium principles,Choquet measures distortion function,TVar . |
| JEL: | C7 D8 |
| Date: | 2005–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0511011&r=ias |
| By: | Huizinga, Harry |
| Abstract: | The EU deposit insurance directive requires member states to maintain deposit insurance with a minimum insured amount of 20,000 euros. This paper reviews the rationale for international coordination of deposit insurance policies. For international externalities of deposit insurance policies to exist, there has to be international ownership of either bank deposits or bank shares. On both counts, EU banking markets are currently highly integrated. The minimum coverage of 20,000 euros imposes costs if it forces some countries to 'overinsure' deposits. From a national perspective, the deposit insurance directive does not appear to result in overinsurance in the EU-15, but there may be overinsurance in several of the new member states. |
| Keywords: | deposit insurance; international coordination |
| JEL: | F36 G28 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5277&r=ias |
| By: | Dana Goldman; Nicole Maestas |
| Abstract: | As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. We measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. We account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. We find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Given that just 50 percent of our sample holds risky assets, these are economically sizable effects. It also suggests an important link between the availability and pricing of health insurance and the financial behavior of the elderly. |
| JEL: | I0 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11818&r=ias |
| By: | Christian Hagist; Norbert Klusen; Andreas Plate; Bernd Raffelhüschen |
| Abstract: | During the next decades the populations of most developed countries will grow older as a result of the low level of birth rates since the 1970s and/or the continuously increasing life expectancy. We show within a Generational Accounting framework how unsustainable the public finances of France, Germany, Switzerland and the U.S. are, given their demographic developments. Thereby our focus lies on social health insurance systems that are in addition affected by medical-technical progress. Due to the cost-increasing effect of medical-technical progress one can justifiably say that social health insurance schemes are the major drivers behind unsustainable fiscal policies. |
| JEL: | H51 I11 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1574&r=ias |
| By: | Schmidt Lucie (Williams College) |
| Abstract: | Infertility currently affects over 6 million individuals in the United States. While most health insurance plans nationwide do not cover infertility diagnoses or treatments, to date fifteen states have enacted some form of infertility insurance mandate. In this paper, I use data from the Vital Statistics Detail Natality Data and Census population estimates to examine whether these state-level mandates were successful in increasing fertility rates. Using a difference-in-differences approach, I exploit variation in the enactment of mandates both across states and over time, and identify control groups that should not have been affected by infertility coverage. My results suggest that the mandates significantly increase first birth rates for women over 35, and these results are robust to a number of specification tests. |
| Keywords: | infertility, impaired fecundity, insurance mandates, fertility |
| JEL: | J |
| Date: | 2005–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0511014&r=ias |
| By: | Kaoru Hosono; Hiroko Iwaki; Kotaro Tsuru |
| Abstract: | We investigate the effectiveness of market discipline by depositors during the period of 1992-2002 in the four crisis-hit Asian countries: Indonesia, Korea, Malaysia and Thailand. In Indonesia, the crises first weakened and then strengthened market, which is consistent with the wake-up-call effect found for the Latin American crisis-hit countries (Martinez Peria and Schmukler, 2001). Unlike Indonesia, we could not find an increase in depositors' responsiveness to bank risk after the crisis in the other three countries. In Korea and Thailand, depositors' risk sensitivity rather decreased after the crisis. In these countries, market discipline was at play before the crisis and the deposit protection schemes were constructed to ensure its credibility under stable political conditions. |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:05029&r=ias |
| By: | Ana Rute Cardoso (IZA Bonn, University of Minho and CEPR); Miguel Portela (Tinbergen Institute, NIPE-University of Minho and IZA Bonn) |
| Abstract: | We evaluate the impact of product market uncertainty on workers wages, addressing the questions: To what extent do firms provide insurance to their workforce, insulating their wages from shocks in product markets? How does the amount of insurance provided vary with firm and worker attributes? We use a longitudinal matched employer-employee dataset of remarkable quality. The empirical strategy is based on Guiso et al. (2005). We first estimate dynamic models of sales and wages to retrieve consistent estimates of shocks to firms' sales and to workers’ earnings. We are then able to estimate the sensitivity of wages to permanent and transitory shocks to firm performance. Results point to the rejection of the full insurance hypothesis. Workers’ wages respond to permanent shocks to firm performance, whereas they are not sensitive to transitory shocks. Managers are not fully insured against transitory shocks, while they receive the same protection against permanent shocks as workers in other occupations. Firms with higher variability in their sales, and those operating in different industries, offer more insurance against permanent shocks. Comparison with Guiso et al. (2005) indicates that Portuguese firms provide less insurance than Italian firms, corroborating evidence on the high degree of wage flexibility in Portugal. |
| Keywords: | product market uncertainty, wage shocks, risk sharing, wage insurance |
| JEL: | C33 D21 J33 J41 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1865&r=ias |
| By: | Katherine Ho |
| Abstract: | Managed care health insurers in the US restrict their enrollees' choice of hospitals to specific networks. This paper investigates the causes and welfare effects of the observed hospital networks. A simple profit maximization model explains roughly 63 per cent of the observed contracts between insurers and hospitals. I estimate a model that includes an additional effect: hospitals that do not need to contract with all insurance plans to secure demand (for example, providers that are capacity constrained under a limited or selective network) may demand high prices that not all insurers are willing to pay. Hospitals can merge to form "systems" which may also affect bargaining between hospitals and insurance plans. The analysis estimates the expected division of profits between insurance plans and different types of hospitals using data on insurers' choices of network. Hospitals in systems are found to capture markups of approximately 19 per cent of revenues, in contrast to non-system, non-capacity constrained providers, whose markups are assumed to be about zero. System members also impose high penalties on plans that exclude their partners. Providers that are expected to be capacity constrained capture markups of about 14 per cent of revenues. I show that these high markups imply an incentive for hospitals to under-invest in capacity despite a median benefit to consumers of over $330,000 per new bed per year. |
| JEL: | I0 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11822&r=ias |
| By: | Thomas Papon (EUREQua) |
| Abstract: | This paper reports results from an experimental study that investigates insurance behaviours in low-probability high-loss risk situations. This study reveals that insurance behaviours may depend on the individual prior experience towards risk. It may also depend on the duration of the commitment period, namely the period during which individuals commit themselves to maintain the same insurance decision. Non-additive decision models such as Dual Theory and Cumulative Prospect Theory seem to have a higher descriptive power than Expected Utility Theory when explaining subjects' behaviours. This paper presents a direct experimental test of the prediction of Myopic Prospect Theory relative to insurance demand. This study is also designed to test the significance of gambler's fallacy and availability bias in the insurance decision process. These theoretical concepts help to understand many behaviours commonly observed in reality but which remain unexplained within the E.U framework. In particular, this paper provides new explanations about the puzzling fact that people usually fail to obtain insurance against disaster-type risks such as natural disasters, even when premiums are close to actuarially fair levels. According to our experimental results, the deficiency of insurance demand for natural disasters may be due to the lack of individual prior experience towards such risks ; as well as the relatively short commitment period of insurance policies (usually one fiscal year) compared with the empirical frequency of major natural hazards (centennial and even more). |
| Keywords: | Insurance demand, Low-probability high-consequence risks, heuristics and bias in risk perception, experimental methodology, Cumulative Prospect Theory, Dual Theory. |
| JEL: | C90 C91 D1 D81 D84 G22 M31 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:b04083&r=ias |
| By: | Francois-Éric Racicot (Département des sciences administratives, Université du Québec (Outaouais) et LRSP); Raymond Théoret (Département de stratégie des affaires, Université du Québec (Montréal)) |
| Abstract: | In this paper, we simulate portfolios which aim to insure the invested capital. The object of our simulations is the duplication of the cashflows of strategies based on options. We initially show how to duplicate the cash-flows of a call by using a leveraged portfolio of stocks. After, we simulate another portfolio which aims to replicate a protective put. Finally, we simulate the cushion technique of Black and analyse the sensitivity of the insured portfolio to some parameters like the degree of risk aversion of the investor. We consider the limits of each of the studied strategies. |
| Keywords: | Financial Engineering; Portfolio Insurance; Monte Carlo simulation. |
| JEL: | G12 G13 G33 |
| Date: | 2005–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:pqs:wpaper:0332005&r=ias |