nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒01‒31
nine papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance Data By Abbring, J.H.; Chiappori, P.A.; Zavadil, T.
  2. Principal-Agent Problem with Minimum Performance Insurance: The Case of Mandatory Individual Pension Accounts By Juan Manuel Julio Román
  3. Self-Employment and the Role of Health Insurance By Gumus, Gulcin; Regan, Tracy L.
  4. Social Norms and Individual Savings in the Context of Informal Insurance By Zaki Wahhaj
  5. Does Deposit Insurance Improve Financial Intermediation? Evidence from the Russian Experiment By Chernykh, Lucy; Rebel, Cole
  6. Modelling the disability severity score in motor insurance claims: an application to the Spanish case By Miguel Santolino; Jean-Philippe Boucher
  7. The Impact of Children's Public Health Insurance Expansions on Educational Outcomes By Phillip B. Levine; Diane Whitmore Schanzenbach
  8. Take-Up of Medicare Part D: Results from the Health and Retirement Study By Helen Levy; David Weir
  9. Tort Reform and the Demand for Medical Care: Evidence from State-by-State Variation in Non-Economic Damages Caps By Anca Cotet

  1. By: Abbring, J.H.; Chiappori, P.A.; Zavadil, T. (Tilburg University, Center for Economic Research)
    Abstract: This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme, and their effects on claim times and sizes under moral hazard. We develop tests that exploit these structural implications of moral hazard and experience rating. Unlike much of the earlier literature, we find evidence of moral hazard.
    Keywords: insurance;moral hazard;selection;state dependence;event-history analysis.
    JEL: D82 G22 C41 C14
    Date: 2008
  2. By: Juan Manuel Julio Román
    Abstract: A minimum performance insurance in the Principal-Agent problem is wealth reducing to the principal. This result points to further ine±- ciencies in mandatory individual Pension Funds' contracts, particularly the one established in the 1993's 100th Law in Colombia.
    Date: 2009–01–14
  3. By: Gumus, Gulcin (Florida International University); Regan, Tracy L. (University of Miami)
    Abstract: We investigate the effect of health insurance on labor market transitions in and out of self-employment as well as on the likelihood of being self-employed. We consider the role of individual health insurance coverage along with that from a spouse. Next, we examine a series of tax deductions granted to the self-employed through amendments made to the 1986 Tax Reform Act. Using data from the Current Population Survey for 1996-2007, we find significant but small effects of the after-tax health insurance premium on the entry rate, with no effect on exits from self-employment or the likelihood of being self-employed.
    Keywords: health insurance, self-employment, CPS, ORG
    JEL: J32 J48 I11
    Date: 2009–01
  4. By: Zaki Wahhaj
    Abstract: This paper develops a theory of informal insurance in the presence of an intertemporal technology. It is shown that when an insurance agreement suffers from enforcement problems, constraints on individual savings behaviour can enable the group to sustain greater cooperation. This result provides a motivation for a variety of social norms observed in traditional societies which discourage 'excessive' accumulation of wealth by individuals. The paper also shows that social norms that discourage savings are more likely to benefit poorer communities and thus, paradoxically, cause them to fall further behind even as it serves a useful purpose.
    Date: 2008–10
  5. By: Chernykh, Lucy; Rebel, Cole
    Abstract: This study examines how the introduction of deposit insurance affects a banking system, using the deposit-insurance scheme introduced into the Russian banking system as a natural experiment. The fundamental research question is whether the introduction of deposit insurance leads to a more effective banking system as evidenced by increased deposit-taking and decreased reliance upon State-owned banks as custodians of retail deposits. We find that banks entering the new deposit-insurance system increased both their level of retail deposits and their ratios of retail deposits to total assets relative to banks that did not enter the new deposit insurance system. We also find that these results hold up in a multivariate panel-data analysis that controls for bank and time random effects. The longer a bank was entered into the deposit insurance system, the greater was its level of deposits and its ratio of deposits to assets. Moreover, this effect was stronger for regional banks and for smaller banks. Finally, we find that implementation of the new deposit-insurance system had the effect of “leveling the playing field” between State-owned banks and privately owned banks.
    Keywords: bank; deposit insurance; moral hazard; Russia; State-owned bank
    JEL: E58 G28 G21
    Date: 2009–01–15
  6. By: Miguel Santolino (Faculty of Economics, University of Barcelona); Jean-Philippe Boucher (Département de Mathématiques, Université du Québec à Montréal)
    Abstract: Bodily injury claims have the greatest impact on the claim costs of motor insurance companies. The disability severity of motor claims is assessed in numerous European countries by means of score systems. In this paper a zero inflated generalized Poisson regression model is implemented to estimate the disability severity score of victims in-volved in motor accidents on Spanish roads. We show that the injury severity estimates may beautomatically converted into financial terms by insurers at any point of the claim handling process. As such, the methodology described may be used by motor insurers operating in the Spanish market to monitor the size of bodily injury claims. By using insurance data, various applications are presented in which the score estimate of disability severity is of value to insurers, either for computing the claim compensation or for claim reserve purposes.
    Keywords: Motor accident, disability severity, zero-inflated generalized Poisson model, disability scoring scale.
    Date: 2009–01
  7. By: Phillip B. Levine; Diane Whitmore Schanzenbach
    Abstract: This paper examines the impact of public health insurance expansions through both Medicaid and SCHIP on children's educational outcomes, measured by 4th and 8th grade reading and math test scores, available from the National Assessment of Educational Progress (NAEP). We use a triple difference estimation strategy, taking advantage of the cross-state variation over time and across ages in children’s health insurance eligibility. Using this approach, we find that test scores in reading, but not math, increased for those children affected at birth by increased health insurance eligibility. A 50 percentage point increase in eligibility is found to increase reading test scores by 0.09 standard deviations. We also examine whether the improvements in educational outcomes can be at least partially attributed to improvements in health status itself. First, we provide further evidence that increases in eligibility are linked to improvements in health status at birth. Second, we show that better health status at birth (measured by rates of low birth-weight and infant mortality), is linked to improved educational outcomes. Although the methods used to support this last finding do not completely eliminate potentially confounding factors, we believe it is strongly suggestive that improving children's health will improve their classroom performance.
    JEL: I18 I21
    Date: 2009–01
  8. By: Helen Levy; David Weir
    Abstract: We analyze data from the Health and Retirement Study on senior citizens’ take-up of Medicare Part D. Take-up among those without drug coverage in 2004 was high; about fifty to sixty percent of this group have Part D coverage in 2006. Only seven percent of senior citizens lack drug coverage in 2006 compared with 24 percent in 2004. We find little circumstantial evidence that Part D crowded out private coverage in the short run, since the persistence of employer coverage was only slightly lower in 2004 – 2006 than it was in 2002 – 2004. We find that demand for prescription drugs is the most important determinant of the decision to enroll in Part D among those with no prior coverage. Many of those who remained without coverage in 2006 reported that they do not use prescribed medicines, and the majority had relatively low out-of-pocket spending. Thus, for the most part, Medicare beneficiaries seem to have been able to make economically rational decisions about Part D enrollment despite the complexity of the program. We also find that Part D erased socioeconomic gradients in drug coverage among the elderly.
    JEL: I18 I38
    Date: 2009–01
  9. By: Anca Cotet (Department of Economics, Ball State University)
    Abstract: Non-economic damages caps are meant to improve access to medical care by decreasing the operational costs of medical practices and encouraging entry in medical field. The literature indicates they are successful in increasing the number of physicians; however, by reducing the cost of malpractice noneconomic damages caps also affect physicians’ incentives to provide high quality care. A lower expected quality of care could reduce the demand for medical services. In this case changes in the number of physicians can not pick up the entire impact of non-economic damages caps on medical care delivery. This paper uses state level panel data to obtain estimates of the impact of non-economic damages caps on medical care utilization rates. The empirical results suggest that non-economic damages caps have a negative impact on admissions and surgeries in community hospitals, and on prenatal care. Since these results may be affected by selection, this paper uses the timing of adoption of term limits for legislators as an instrumental variable to isolate the causal effect of non-economic damages caps. In this specification the estimates are larger but statistically significant only in the case of surgeries. Specifically, I find that non-economic damages caps are associated with 14 fewer surgeries per 1000 individuals.
    Date: 2009–01

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