nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒10‒07
five papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Nonverbal language – the weapon of the insurance agent By Mitu, Narcis Eduard
  2. Inequity in Publicly Funded Physician Care: What Is The Role Of Private Prescription Drug Insurance? By Sara Allin; Jeremiah Hurley
  3. Uberrimae Fidei and Adverse Selection: the equitable legal judgment of Insurance Contracts By Strauss, Jason David
  4. Market Discipline and Deposit Insurance in Russia By Peresetsky , Anatoly
  5. The financial leverage of Insurers subject to price regulation: evidence from Canada By Strauss, Jason David

  1. By: Mitu, Narcis Eduard
    Abstract: Within the insurance process, the person who insures as well as the person who wishes to buy an insurance policy must control well enough the communication techniques. In deed, the insurance is grounded on communication. Various scientific researches showed that most people involved in a business are very careful to what they say and the way they say it. Along with the way we speak, in the insurance field as well as in other many fields we tried to emplasize the necessity of ackowledging and controlling the nonverbal communication techiniques.
    Keywords: nonverbal communication; insurance.
    JEL: D70 D83 G20
    Date: 2008
  2. By: Sara Allin (LSE Health, London School of Economics and Political Science); Jeremiah Hurley (Department of Economics and Centre for Health Economics and Policy Analysis, McMaster University)
    Abstract: This study examines the impact that private financing of prescription drugs in Canada has on equity in the utilization of publicly financed physician services. The complementary nature of prescription drugs and physician service use alongside the reliance on private finance for drugs may induce an income gradient in the use of physicians. We use established econometric methods based on concentration curves to measure equity in physician utilization and its contributors in the province of Ontario. We find that individuals with prescription drug insurance make more physician visits than do those without insurance, and the effect on utilization is stronger for the likelihood of a visit than the conditional number of visits, and for individuals with no chronic conditions than those with at least one condition. Results of the equity analyses reveal the most important contributors to the pro-rich inequity in physician utilization are income and private insurance, while public insurance, which covers older people and those on social assistance, has a pro-poor effect. These findings highlight that inequity in access to and use of publicly funded services may arise from the interaction with privately financed health services that are complements to the use of public services.
    Keywords: equity, private insurance, prescription drugs, physician utilization
    Date: 2008
  3. By: Strauss, Jason David
    Abstract: This paper examines uberrimae fidei (utmost good faith) with adverse selection in an insurance market. If consumers know their risk type (they know their expected loss), and if they understand the concept of uberrimae fidei, adverse selection is completely eliminated. However, if uberrimae fidei is strictly enforced by the courts, insurers have no incentive to do any underwriting whatsoever. Therefore, whether consumers know their risk type or not, and whether they understand uberrimae fidei, is of paramount importance. If consumers don’t know their risk type or don’t understand uberrimae fidei, then the (equitable) non-strict enforcement (judicial ruling) of contracts of insurance can be efficiency enhancing as it can create an ex-ante incentive for insurers to underwrite. With an ex-ante positive probability that a court may rule equitably in favor of the insured, the insurer engages in underwriting as part of its profit maximization objective, helping insureds to discover their risk type and/or educating potential insureds on the requirements of a contract of uberrimae fidei. This paper therefore contributes a new theory of underwriting.
    Keywords: Insurance; Uberrimae Fidei; Utmost Good Faith; Adverse Selection; Contract Theory; Equity; Equitable Law; Institutions; Insurance Cycle
    JEL: D86 G22 D82
    Date: 2008–10–02
  4. By: Peresetsky , Anatoly (BOFIT)
    Abstract: The paper presents a study of Russian banks' interest rates on household deposits during the formation period of the deposit insurance system. It is shown that market discipline weakened after deposit insurance was effectively in place.
    Keywords: deposit insurance; market discipline; deposit interest rates
    JEL: G21 G28 P37
    Date: 2008–10–02
  5. By: Strauss, Jason David
    Abstract: The variation in the degree of price regulation in the property-liability insurance market in Canada varies across time and space, creating an opportunity to test a recurring theory in regulatory economics: that price regulated firms have higher levels of financial leverage. Using an instrumental variable for the stringency of price-regulation, this paper utilizes a panel data set of Canadian property-liability insurers over ten years of time, 1997-2006. The results support the theory but do not conclude on whether the increase in financial leverage is a strategic decision or a natural reaction to worsening business conditions brought-on by price-regulation.
    Keywords: Price Regulation; Insurance; Financial Leverage; Capital Structure; Bankruptcy
    JEL: G22 G32 G28 G33
    Date: 2008–09–30

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