nep-ias New Economics Papers
on Insurance Economics
Issue of 2006‒04‒29
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Correlated Risks: A Conflict of Interest Between Insurers and Consumers and Its Resolution By Patrick Eugster; Peter Zweifel
  2. Partially Identifying True Rates of Health Insurance Coverage Under Contaminated Sampling By Kreider, Brent
  3. Trends and cycles in the euro area: how much heterogeneity and should we worry about it? By Domenico Giannone; Lucrezia Reichlin
  4. Market Discipline and Deposit Insurance Reform in Japan By Masami Imai
  5. The Effects of State Policy Design Features on Take Up and Crowd Out Rates for the State Children’s Health Insurance Program By Cynthia Bansak; Steven Raphael
  6. Analysis and Evaluation of Ecosystem Resilience: An Economic Perspective By Lucia Vergano; Paulo A.L.D. Nunes

  1. By: Patrick Eugster (Socioeconomic Institute, University of Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich)
    Abstract: This contribution starts out by noting a conflict of interest between consumers and insurers. Consumers face positive correlation in their assets (health, wealth, wisdom, i.e. skills), causing them to demand a great deal of insurance coverage. Insurers on the other hand eschew positively correlated risks. It can be shown that insurance contributes to a reduction of their asset volatility only if unexpected deviations of payments from expected value correlate negatively across lines of insurance. Analyzing deviations from trend in aggregate insurance payments, one finds the following for the United States and Switzerland. Private U.S. but not Swiss insurance has a hedging effect for consumers, while both social insurance schemes expose consumers to excess asset volatility. In the insurance systems of both countries, the private component fails to offset deviations in the social component (and vice versa). As to the supply of insurance, cointegration analysis indicates the absence of common trends. Therefore, insurance companies could offer combined policies to the benefit of consumers, hedging their underwriting risks both domestically and internationally.
    Keywords: Insurance, Portfolio Theory, International Diversification, Combined Contracts
    JEL: G22 G15 G11 D14 C22
    Date: 2006–04
  2. By: Kreider, Brent
    Abstract: This paper derives easy-to-compute identification regions for the population's true rate of health insurance coverage in the presence of household reporting errors. These regions reduce the degree of uncertainty about the unknown parameter compared with Horowitz and Manski's (1995) nonparametric contaminated sampling bounds.
    Keywords: health insurance, contaminated sampling, nonparametric bounds, classification error
    JEL: C1 I1
    Date: 2006–04–15
  3. By: Domenico Giannone (European Centre for Advanced Research in Economics and Statistics (ECARES) Université Libre de Bruxelles, CP 114, Av. F.D. Roosevelt, 50. B-1050 Brussels, Belgium); Lucrezia Reichlin (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany.)
    Abstract: Not so much and we should not, at least not yet.
    Keywords: International Business Cycles, Euro Area, Risk Sharing, European Integration, Income Insurance.
    JEL: E32 C33 C53 F2 F43
    Date: 2006–03
  4. By: Masami Imai (Economics and East Asian Studies, Wesleyan University)
    Abstract: On April 1, 2002, the Japanese government lifted a blanket guarantee of all deposits and began limiting the coverage of time deposits. This paper uses this deposit insurance reform as a natural experiment to investigate the relationship between deposit insurance coverage and market discipline. I find that the reform raised the sensitivity of interest rates on deposits, and that of deposit quantity to default risk. In addition, the interest rate differentials between partially insured large time deposits and fully insured ordinary deposits increased for risky banks. These results suggest that the deposit insurance reform enhanced market discipline in Japan. I also find that too-big-to-fail (TBTF) policy became a more important determinant of interest rates and deposit allocation after the reform, thereby partially offsetting the positive effects of the deposit insurance reform on overall market discipline.
    Keywords: Deposit Insurance, Market Discipline, Japanese Banks
    JEL: G2 G28 O53
    Date: 2006–01
  5. By: Cynthia Bansak (Department of Economics, San Diego State University); Steven Raphael (Goldman School of Public Policy, University of California, Berkeley)
    Abstract: We evaluate the effects of state policy design features on SCHIP take up rates and on the degree to which SCHIP benefits crowd out private benefits. The results indicate that overall program take up rates range from 10.1 to 10.5 percent. However, there is considerable heterogeneity across states, suggesting a potential role of inter-state variation in policy design. We find that several design mechanisms have significant and substantial positive effects on take up. For example, eliminating asset tests, offering continuous coverage, simplifying the application and renewal processes, and extending benefits to parents all have sizable and positive effects on take-up rates. Mandatory waiting periods, on the other hand, consistently reduce take-up rates. In all, inter-state differences in outreach and anti-crowd out efforts explain roughly one quarter of the cross-state variation in take-up rates. Concerning the crowding out of private health insurance benefits, we find that between one quarter and one third of the increase in public health insurance coverage for SCHIP eligible children is offset by a decline in private health coverage. We find little evidence that the policy-induced variation in take-up is associated with a significant degree of crowd-out, and no evidence that the negative effect on private coverage caused by state policy choices is any greater than the overall crowding out effect. This suggests that states are not augmenting take-up rates by enrolling children that are relatively more likely to have private health insurance benefits.
    Keywords: State Children’s Health Insurance Program (SCHIP), Crowd Out, Take Up
    Date: 2005–03
  6. By: Lucia Vergano (Università degli studi di Pavia); Paulo A.L.D. Nunes (University of Venice and Fondazione Eni Enrico Mattei)
    Abstract: This paper focuses on the analyses and evaluation of resilience anchored in an economic perspective. Resilience, as well as most of the benefits provided by ecosystems, is not priced on current markets. However, this does not mean that resilience is of no value for humans. On the contrary, the interest of using an economic perspective, and the respective scientific methodology, will be put forward in terms of resilience relevance for ecosystems’ life and functioning, and its impact on human welfare. The economic perspective is anchored in an anthropocentric analysis meaning that resilience is evaluated in terms of provision of natural capital benefits. These, in turn, are interpreted as an insurance against the risk of ecosystem malfunctioning and the consequent interruption of the provision of goods and services to humans. For this analysis, we make use of a conceptual framework so as to identify and describe the different value components of resilience. Finally, we present an illustration that tackles the economic analysis and discussion of resilience benefits in the context of the Venice Lagoon.
    Keywords: Ecosystems’ resilience, Ecosystems’ thresholds, Natural insurance capital, Economic perspective, Economic value
    JEL: D62 H41 Q25 Q28 Q51
    Date: 2006–02

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