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on Insurance Economics |
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Issue of 2006‒03‒11
five papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Philip de Jong (Aarts, De Jong, Wilms & Goudriaan Public Economics B.V. and University of Amsterdam); Maarten Lindeboom (Free University Amsterdam, Tinbergen Institute, HEB, Netspar and IZA Bonn); Bas van der Klaauw (Free University Amsterdam, Tinbergen Institute, Scholar, IFAU, CEPR and IZA Bonn) |
| Abstract: | This paper investigates the effects of intensified screening of disability insurance benefit applications. A large-scale experiment was setup where in 2 of the 26 Dutch regions case workers of the disability insurance administration were instructed to screen applications more intense. The empirical results show that intense screening reduces long-term sickness absenteeism and disability insurance applications. This provides evidence both for direct effects of the more intensive screening on work resumption during sickness absenteeism and for self-screening by potential disability insurance applicants. We do not find any spillover effects to the inflow into unemployment insurance. A cost-benefit analysis shows that the costs of the intensified screening are only a small fraction of its benefits. |
| Keywords: | disability insurance, experiment, policy evaluation, sickness absenteeism, self-screening |
| JEL: | J28 J65 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1981&r=ias |
| By: | Panos Konstas |
| Abstract: | The Federal Deposit Insurance Corporation (FDIC) currently insures bank deposit balances up to $100,000. According to some observers, statutory protection creates moral hazard problems for insurers because it allows banks to engage in risky activities. As an example, moral hazard was a key contributor to huge losses suffered when thrift institutions failed during the 1980s. This brief by Konstas outlines a plan to reduce the risk of government losses by replacing insured deposits with uninsured deposits and eliminating some of the costs of deposit insurance. His plan proposes a self-insured (SI) depositor system that places an intermediary between the lender (saver) and borrower (bank) in the credit-flow chain. The FDIC would guarantee saver loans and allow the intermediary to borrow at the risk-free interest rate if the intermediaryÕs bank deposit is statutorily defined outside the realm of FDIC insurance. The risk is therefore transferred to depositors (intermediaries); thus creating incentives for depositors to earn a rate of return at least equal to the cost of borrowing plus a risk premium based on the risk profile of banks. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb_83&r=ias |
| By: | Alan M. Garber; Charles I. Jones; Paul M. Romer |
| Abstract: | This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and productivity literatures suggest that firms in many industries may possess inadequate incentives to innovate. Standard results in the health literature suggest that health insurance leads to the overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives. Because of the large subsidies to demand from health insurance, limits on the lifetime of patents and possibly limits on monopoly pricing may be necessary to ensure that pharmaceutical companies do not possess excess incentives for innovation. |
| JEL: | I1 O30 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12080&r=ias |
| By: | Howard Kunreuther; Erwann Michel-Kerjan |
| Abstract: | The Terrorism Risk Insurance Act of 2002 (TRIA) established a public-private program to cover commercial enterprises against foreign terrorism on US soil. It was a temporary measure to increase the availability of risk coverage for terrorist acts by requiring insurers to provide coverage. Initially established to sunset on December 31, 2005, a two-year extension has been voted by Congress and signed by the President in December. This paper provides an extensive series of empirical analyses of loss sharing under this program in 2005, and a prospective analysis for 2006. Using data collected on the top 451 insurers operating in the United States, we examine the impact of TRIA on loss sharing between the key stakeholders: victims, insurers and their policyholders, and the taxpayers. By simulating the explosion of a 5-ton truck bomb in major cities in the United States, we conclude that taxpayers are likely not to pay anything for losses below $15 billion. For a $25 billion loss, insurers and policyholders would handle between 80 and 100 percent of the loss depending on the property take up rate. Only for terrorist attacks where insured losses were $100 billion would taxpayers have to pay 50 percent of the claims. Recent modifications of TRIA will transfer an even larger part of the risk to the private sector. We also show that if TRIA were made permanent in its current form some very large insurers could strategize by collecting large amount of premiums for terrorism insurance but only would be financially responsible for a small portion of the claims. Commercial policyholders from all insurers (whether or not covered against terrorism) and the federal government would absorb the residual insured losses, raising equity issues. The paper also reviews a set of possible long-term alternatives or complementary options to the current design of TRIA that could be important features of a more permanent program. We conclude that more than four years after 9/11, the question as to who should pay for the economic consequences of a terrorist attack on the US has not yet received the attention it deserves. Congress or the White House should consider establishing a national commission on terrorism risk coverage before permanent legislation is enacted. |
| JEL: | H56 G22 G28 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12069&r=ias |
| By: | Patricia Born; W. Kip Viscusi; Tom Baker |
| Abstract: | Whereas the literature evaluating the effect of tort reforms has focused on reported incurred losses, this paper examines the long run effects using a comprehensive sample by state of individual firms writing medical malpractice insurance from 1984-2003. The long run effects of reforms are greater than insurers' expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures. The quantile regressions show the greatest effects of joint and several liability limits, noneconomic damages caps, and punitive damages reforms for the firms that are at the high end of the loss distribution. These quantile regression results show stronger, more concentrated effects of the reforms than do the OLS and fixed effects estimates for the entire sample. |
| JEL: | K13 G22 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12086&r=ias |