nep-ias New Economics Papers
on Insurance Economics
Issue of 2006‒06‒17
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Love or Money? Health Insurance and Retirement Among Married Couples By Kanika Kapur; Jeannette Rogowski
  2. Sources of Advantageous Selection: Evidence from the Medigap Insurance Market By Hanming Fang; Michael P. Keane; Dan Silverman
  3. The Austrian Insurance Industry: A Structure, Conduct and Performance Analysis By Jedlicka, Lorenz; Jumah, Adusei
  4. Earthquake vulnerability reduction program in Colombia : a probabilistic cost-benefit analysis By Mahul, Olivier; Jamin, Luis; Ghesquiere, Francis

  1. By: Kanika Kapur; Jeannette Rogowski
    Abstract: This paper examines the role of employer provided health insurance in the retirement decisions of dual working couples. The near elderly have high-expected medical expenditures; therefore, availability of health insurance is an important factor in their retirement decisions. We determine if access to retiree health insurance for early retirement enables couples to time their retirement together – a behavior called “joint retirement.” We find that wives’ retiree health insurance more than doubles the propensity to retire jointly, suggesting that health insurance is an important consideration in coordinating retirement decisions among couples. Even though retiree health insurance has a substantial effect on joint retirement, its effect on overall employment patterns is modest, accounting for a 2 percentage point fall in employment.
    JEL: I1 J32
    Date: 2006–06
  2. By: Hanming Fang; Michael P. Keane; Dan Silverman
    Abstract: We provide strong evidence of advantageous selection in the Medigap insurance market, and analyze its sources. Using Medicare Current Beneficiary Survey (MCBS) data, we find that, conditional on controls for the price of Medigap, medical expenditures for senior citizens with Medigap coverage are, on average, about $4,000 less than for those without. But, if we condition on health, expenditures for seniors on Medigap are about $2,000 more. These two findings can only be reconciled if those with less health expenditure risk are more likely to purchase Medigap, implying advantageous selection. By combining the MCBS and the Health and Retirement Study (HRS), we investigate the sources of this advantageous selection. These include income, education, longevity expectations and financial planing horizons, as well as cognitive ability. Once we condition on all these factors, seniors with higher expected medical expenditure are indeed more likely to purchase Medigap. Surprisingly, risk preferences do not appear to be a source of advantageous selection. But cognitive ability emerges as a particularly important factor, consistent with a view that many senior citizens have difficulty understanding Medicare and Medigap rules.
    JEL: D82 G22 I11
    Date: 2006–06
  3. By: Jedlicka, Lorenz (Department of Economics, BWZ, University of Vienna); Jumah, Adusei (Department of Economics, BWZ, University of Vienna and Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: There exist a vast number of studies on the banking industry. However, the insurance industry remains relatively unexplored. Increasingly, Austrian insurance institutions are becoming important as financial intermediaries in the domestic market, and – based on proximity advantage – also in the Central and Eastern European markets. This paper applies the structure, conduct and performance (SCP) approach to a sample of 52 Austrian insurance firms. The main finding is that the standard SCP hypothesis of highly concentrated markets, which create incentives to engage in collusive behaviour and which in turn leads to higher industry profit rates, cannot be supported by the Austrian insurance industry leads to higher industry profit rates, cannot be supported by the Austrian insurance industry.
    Keywords: Insurance industry, Market structure, Conduct and performance, Industrial organisation
    JEL: G22 L1
    Date: 2006–05
  4. By: Mahul, Olivier; Jamin, Luis; Ghesquiere, Francis
    Abstract: Cost-benefit analysis is a standard tool for determining the efficiency of planned projects. But one of the major difficulties in risk mitigation investments is that benefits are by nature uncertain. In this context, the standard approach relying on the average value of benefits may provide an incomplete picture of the efficiency of the risk mitigation project under consideration. This paper presents a probabilistic cost-benefit analysis relying on a catastrophe risk model. It produces risk metrics such as the exceedance probability curve of the benefit-cost ratio, thus providing the decisionmaker with a more complete risk analysis of the net benefits of the project. This is illustrated with the earthquake vulnerability reduction project in Colombia.
    Keywords: Insurance & Risk Mitigation,Investment and Investment Climate,Banks & Banking Reform,Natural Disasters,Non Bank Financial Institutions
    Date: 2006–06–01

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