nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒10‒28
seven papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. A Case Study about the Reputation of Insurance Companies in Craiova (Romania) By Otovescu Frasie, Maria Cristina
  2. Testing For Asymmetric Information In Insurance Markets With Unobservable Types By Dardanoni, V; Li Donni, P
  3. Estimating Welfare in Insurance Markets Using Variation in Prices By Liran Einav; Amy Finkelstein; Mark R. Cullen
  4. La lutte anti-blanchiment dans le secteur de l’assurance (the fight against money laundering in the insurance sector) By Éric Vernier; Hubert Delval
  5. The impact of Medicare Part D on Medicare-Medicaid Dual-eligible Beneficiaries' Prescription Utilization and Expenditures By Anirban Basu; Wesley Yin; G. Caleb Alexander
  6. How Do States Formulate Medicaid and SCHIP Policy? Economic and Political Determinants of State Eligibility Levels By Jeffrey Milyo; Reagan Baughman
  7. Minimum Funding Ratios for Defined-Benefit Pension Funds By Arjen Siegmann

  1. By: Otovescu Frasie, Maria Cristina
    Abstract: For the present work we consulted the representative specialty works in our country and abroad, which allowed us to establish the current degree of knowledge and debate in the insurance field. We also carried out a survey focused on the population’s interest and opinion regarding the insurance domain in Romania. The gathered data helped us compose a coherent and unitary image of the insurance field and to establish all the conditions and juridical implications of the insurance contract.
    Keywords: insurance activities; policy; facultative insurances; obligatory
    JEL: G22 K22
    Date: 2008–09–20
  2. By: Dardanoni, V; Li Donni, P
    Abstract: In two important recent papers, Finkelstein and McGarry [25] and Finkelstein and Poterba [28] propose a new test for asymmetric information in insurance markets that considers explicitly unobserved heterogeneity in insurance demand. In this paper we propose an alternative implementation of the Finkelstein-McGarry-Poterba test based on the identification of unobservable types by use of finite mixture models. The actual implementation of our test follows some recent advances on marginal modelling as applied to latent class analysis; formal testing procedures for the null of asymmetric information and for the hypothesis that private information is indeed multidimensional can be performed by imposing restrictions on the behavior of these unobservable types. To show the potential applicability of our approach, we look at the long term insurance market as analyzed in Finkelstein and McGarry [25], where we also find strong evidence for both asymmetric information and multidimensional unobserved heterogeneity.
    Keywords: Asymmetric Information, Unobservable Types, Latent Class Analysis, Long Term Insurance Market.
    JEL: D82 G22 I11
    Date: 2008–10
  3. By: Liran Einav; Amy Finkelstein; Mark R. Cullen
    Abstract: We show how standard consumer and producer theory can be used to estimate welfare in insurance markets with selection. The key observation is that the same price variation needed to identify the demand curve also identifies how costs vary as market participants endogenously respond to price. With estimates of both the demand and cost curves, welfare analysis is straightforward. We illustrate our approach by applying it to the employee health insurance choices at Alcoa, Inc. We detect adverse selection in this setting but estimate that its quantitative welfare implications are small, and not obviously remediable by standard public policy tools.
    JEL: C13 C51 D14 D60 D82 I11
    Date: 2008–10
  4. By: Éric Vernier (labrii, ULCO); Hubert Delval (labrii, ULCO)
    Abstract: Ce document a pour objectif d’analyser comment le secteur de l’assurance a réagi contre le phénomène de blanchiment et comment les dispositifs de lutte antiblanchiment initiés par les textes ont été mis en place dans une grande compagnie française. Les informations reprises dans cet article ont été obtenues par de nombreux entretiens réalisés avec les cadres spécialisés de cette compagnie et avec un grand nombre d’agents généraux en prise directe avec la réalité du terrain. The goal of this work is to analyse how the insurance sector has reacted against money laundering and how anti-money laundering plans have been set up in a big French company. The information used for this article has been collected from various interviews realized with specialized executives of this company and with many general agents in direct contact with the reality of the field.
    Keywords: : money laundering, insurance, anti-money laundering
    JEL: O55 O34 O32 L0 L65
    Date: 2008–06
  5. By: Anirban Basu; Wesley Yin; G. Caleb Alexander
    Abstract: Features of Part D gave rise to broad concern that the drug benefit would negatively impact prescription utilization among the six million dual eligible beneficiaries, either during the transition from state Medicaid to Part D coverage, or in the long-run. At the same time, Part D contained other features, such as its auto-enrollment and premium subsidization policies, which were designed to safeguard utilization for this vulnerable group. Using national retail pharmacy claims, we examine the experience of dual eligibles during the first 18 months of Part D. We find no evidence that Part D adversely affected pharmaceutical utilization or out-of-pocket expenditures in the transition period, or in the 18 months subsequent to Part D implementation.
    JEL: H42 I11 I18
    Date: 2008–10
  6. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); Reagan Baughman
    Abstract: We exploit the existence of substantial variation in state policies toward public health insurance for children between 1990 and 2002 to estimate the economic and political determinants of state eligibility levels. Controlling for state and year effects, eligibility levels are not significantly associated with either the percentage of uninsured children in the state or the eligibility policy of neighboring states; further, variation in eligibility levels within state is negatively associated with both the federal matching rate and state fiscal capacity. We also observe that state political preferences, measured by the Democrats share of seats in the lower chamber of the state legislature, are a relatively important a determinant of state eligibility levels. However, other political factors, such as party control of state government, voter turnout, legislative term limits and campaign finance regulations do not influence state eligibility levels.
    Keywords: Medicaid, SCHIP, Political Economy, Race-to-the-Bottom
    JEL: D78 H75
    Date: 2008–10–17
  7. By: Arjen Siegmann
    Abstract: We compute minimum funding ratios for Defined Benefit (DB) plans based on the expected utility that can be achieved in a Defined Contribution (DC) pension scheme. Using Monte Carlo simulation, expected utility is computed for three different specifications of utility: power utility, mean-shortfall and mean-downside deviation. Depending on risk aversion and the level of sophistication assumed for the DC-scheme, minimum acceptable funding ratios are between 0.87 and 1.20. If the DC-scheme is constrained to a fixed-contribution setup, minimum funding ratios are between 0.87 and 0.98. Furthermore, the attractiveness of the DB plan increases with the expected equity premium and the fraction invested in stocks. We conclude that the expected value of intergenerational solidarity, implicit in the DB pension fund, can be large. Given a pension fund with a funding ratio of 1.30, a participant in a DC plan has to pay a 2.7 to 6.1%-point higher contribution to achieve equal expected utility.
    Keywords: defined-benefit pension fund; individual efficiency; defined-contribution
    JEL: E24 E52 J50
    Date: 2008–09

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