nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒06‒13
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Optimal Insurance with Adverse Selection By Hector Chade; Edward Schlee
  2. The Supply of Social Insurance By Gonzalez, M.; Wen, W.
  3. The Impact of Universal Health Insurance on Catastrophic and Out-of-Pocket Health Expenditures in Mexico: a Model with an Endogoenous Treatment Variable By Galarrága, O; Sosa-Rubí, S. G; Salinas, A; Sesma, S
  4. Long-term Labour Market Performance of Whiplash Claimants By Søren Leth-Petersen; Gabriel Pons Rotger
  5. Valuing Guaranteed Minimum Death Benefit Options in Variable Annuities Under a Benchmark Approach By T. Marquardt; Eckhard Platen; S. Jaschke
  6. An Economic Analysis of Obesity in Europe: Health, Medical Care and Absenteeism Costs By Anna Sanz de Galdeano

  1. By: Hector Chade; Edward Schlee
    Date: 2008–06–02
  2. By: Gonzalez, M.; Wen, W.
    Abstract: We propose a theory of the welfare state, in which social transfers are chosen by a governing group interacting with non-governing groups repeatedly. Social demands from the non-governing groups are credible because these groups have the ability to generate social conflict. In this context social insurance is supplied as an equilibrium response to income risks within a self-enforcing social contract. When we explore the implications of such a view of the social contract, we find four main determinants of the welfare state: the degree of aggregate income risk; the heterogeneity of group-specific income risks; the public administration’s ability to implement group-specific transfers; and the ability of the nongoverning groups to coordinate their social demands. We also analyze the link between public good provision and social insurance.
    Date: 2007–12
  3. By: Galarrága, O; Sosa-Rubí, S. G; Salinas, A; Sesma, S
    Abstract: The main goal of Seguro Popular is to improve the financial protection of the uninsured population against excessive health expenditures. Seguro Popular (SP) covers a variety of preventive and curative procedures, as well as medicines, and hospital care for the poorest segment of the Mexican population. Data: This paper estimates the impact of Seguro Popular on catastrophic health expenditures, as well as out-of-pocket health expenditures, from three different sources: National Household Survey of Income and Expenditures (ENIGH 2006); National Health and Nutrition Survey (ENSANUT 2006); and SP Impact Evaluation Survey. Methods: We first estimate naive probit models, and then compare them against bivariate probit models which use instrumental variables that take advantage of the specific SP implementation mechanisms to address the endogeneity of insurance selection choices. Results: No effect on catastrophic health expenditures is observed in the ENIGH sample. However, we find a statistically significant effect on the reduction of household’s expenditures on medicines and outpatient care. On the other hand, Seguro Popular reduces the probability of catastrophic health expenditures using the other two datasets: SP Impact Evaluation Survey, and ENSANUT. We also observe a reduction of the probability of expenditures on medicines and outpatient care among the SP insured families.
    Keywords: catastrophic health expenditures; health insurance; instrumental variables; non-linear methods; Mexico
    JEL: I18 I38
    Date: 2008–06
  4. By: Søren Leth-Petersen (Department of Economics, University of Copenhagen); Gabriel Pons Rotger (AKF, Danish Institute of Governmental Research)
    Abstract: A whiplash is a sudden acceleration-deceleration of the neck and head, typically associated with a rear-end car collision that may produce injuries in the soft tissue. Often there are no objective signs or symptoms of injury, and diagnosing lasting whiplash associated disorders (WAD) is difficult, in particular for individuals with mild or moderate injuries. This leaves a scope for compensation-seeking behaviour. The medical literature disagrees on the importance of this explanation. In this paper we trace the long-term earnings of a group of Danish individuals with mild to moderate injuries claiming compensation for having permanently lost earnings capacity and investigate if they return to their full pre-whiplash earnings when the insurance claim has been assessed. We find that about half of the claimants, those not granted compensation, return to an earnings level comparable with their pre-whiplash earnings suggesting that these individuals do not have chronic WAD in the sense that their earnings capacity is reduced. The other half, those granted compensation, experience persistent reductions in earnings relative to the case where they had not been exposed to a whiplash, even when they have a strong financial incentive to not reduce earnings. This suggests that moderate injuries tend to be chronic, and that compensation-seeking behaviour is not the main explanation for this group. We find that claimants with chronic WADs used more health care in the year prior to the whiplash than claimants with non-chronic cases. This suggests that lower initial health capital increases the risk that a whiplash causes persistent WAD.
    Keywords: dissolution; whiplash; register data; labour market
    JEL: I12 J29
    Date: 2008–06
  5. By: T. Marquardt (Munich Reinsurance Company); Eckhard Platen (School of Finance and Economics, University of Technology, Sydney); S. Jaschke (Munich Reinsurance Company)
    Abstract: Variable annuities (VAs) represent a marked change from earlier life products in the guarantees that they o?er and it is no longer possible to manage the risks of these liabilities using traditional actuarial methods. Thinking about guarantees as options suggests applying risk neutral pricing in order to value the embedded guarantees, such as guaranteed minimum death bene?ts (GMDBs). However, due to the long maturities of contracts, stochastic volatility and many other reasons, VA markets are incomplete. In this paper we propose a methodology for pricing GMDBs under a benchmark approach which does not require the existence of a risk neutral probability measure. We assume that the insurance company invests in the growth optimal portfolio of its investment universe and apply real world pricing rather than risk neutral pricing. In particular, we consider the minimal market model and conclude that in this setup the fair price of a roll-up GMDB is lower than the price obtained by applying standard risk neutral pricing. Moreover, we take into account rational as well as irrational lapsation of the policyholder.
    Keywords: Benchmark approach; fair pricing; GMDB; growth optimal portfolio; lapsation; local volatility function; minimal market model; variable annuities
    Date: 2008–04–01
  6. By: Anna Sanz de Galdeano
    Abstract: Obesity is not only a health but also an economic phenomenon with potentially important direct and indirect economic costs that are unlikely to be fully internalized by the obese. In the US, obesity prevalence is the highest among OECD countries and the issue has long been the focus of policy debate and academic research. However, European obesity rates are rising and there is still a lack of economic analysis of the obesity phenomenon in Europe. This paper attempts to fill in this gap by using longitudinal micro-evidence from the European Community Household Panel to assess the importance of several costs of obesity in nine EU countries. The analysis provides nationally comparable estimates of the costs of obesity in terms of health, use of health care services and absenteeism.
    Date: 2007–12

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