nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒10‒17
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality By Karen Kopecky; Tatyana Koreshkova
  2. Calamità naturali e assicurazione: elementi di analisi per una riforma By Angelo Baglioni; Michele Grillo
  3. Risk, Credit, and Insurance in Peru: Field Experimental Evidence By Galarza, Francisco
  4. Moral Hazard Matters: Measuring Relative Rates of Underinsurance Using Threshold Measures By Jean Marie Abraham; Thomas DeLeire; Anne Beeson Royalty
  5. Angebotsinduzierung und Mitnahmeeffekt im Rahmen der Riester-Rente. Eine empirische Analyse By Pfarr, Christian; Schneider, Udo
  6. Small-area variation in health care affecting the choice of cesarean delivery: the case of a colombian health insurer By Vecino Ortiz, Andrés Ignacio; Bardey, David; Castano-Yepes, Ramón

  1. By: Karen Kopecky (University of Western Ontario); Tatyana Koreshkova (Concordia University)
    Abstract: We consider a life-cycle model with idiosyncratic risk in labor earnings, out-of-pocket medical and nursing home expenses, and survival. Partial insurance is available through welfare, Medicaid, and social security. Calibrating the model to the U.S., we find that nursing home expenses play an important role in the savings of the wealthy. In our policy analysis, we find that elimination of out-of-pocket expenses through public health care would reduce the capital stock by 12 percent, Medicaid and old-age welfare programs crowd out 44 percent of savings and greatly increase wealth inequality, and social security effects are influenced by out-of-pocket health expenses.
    Keywords: health expenses, nursing home, idiosyncratic risk, savings, wealth inequality, old-age social insurance
    JEL: E21 I18 I38
    Date: 2009–06–20
  2. By: Angelo Baglioni (DISCE, Università Cattolica); Michele Grillo (DISCE, Università Cattolica)
    Abstract: Private insurance markets provide insufficient coverage for risks coming from natural disasters. We argue that in such markets the typical market failure is mainly due to reasons other than asymmetric information. More specifically, the low probability of a disaster, together with the height of the economic damage normally involved and the strong correlation among individual risks raise the insurers’ and lower the potential clients’ reservation price. The solution recently provided within the market (the CAT bonds) is interesting but unsatisfactory. Therefore the intervention of the public sector is needed. After analyzing the experience of some countries (USA, France, Spain, Switzerland), we propose a reform plan for Italy that avoids the discretionary ex post public intervention, allows an inter-temporal risk diversification, and avoids the waste of resources in risk selection (a typical feature of the private provision of insurance).
    Keywords: Insurance, Natural disasters, Public provision of services
    JEL: G22 H44
    Date: 2009–09
  3. By: Galarza, Francisco
    Abstract: This paper reports the results of behavioral economic experiments conducted in Peru to examine the relationship amongst risk preferences, loan take-up, and insurance purchase decisions. This area-based yield insurance can help reduce people's vulnerability to large scale covariate shocks, and can also lower the loan default probability under extreme negative covariate shocks. In a context of collateralized formal credit markets, we provide suggestive evidence that insurance may help reduce the fear of losing collateral that prevents potential borrowers from taking loans. Framing these experiments to recreate a real life situation, we started with a Baseline Game where subjects had to choose between a fallback production project and an uninsured loan.We then introduced a third project choice--loan with yield insurance (Insurance Game)--which allows us to measure the effect of introducing insurance on the demand for loans. Overall, more than 50 percent of the subjects are willing to buy insurance in this insurance game. Further, controling for choices made in the baseline game, covariate shocks experienced earlier, and previous rounds' winnings, we find that the decision to take the insured loan (uninsured loan) rather than any of the other two projects is predicted by wealth and lower (higher) levels of risk aversion. Interestingly, this relationship with risk aversion continues to hold when we control for the overweighting of low-probability events observed in the data.
    Keywords: area-yield insurance; credit; covariate risk; idiosyncratic risk; risk aversion; probability weighting; experimental economics; Peru
    JEL: D81 C93
    Date: 2009–08
  4. By: Jean Marie Abraham; Thomas DeLeire; Anne Beeson Royalty
    Abstract: This paper illustrates the impact of moral hazard for estimating relative rates of underinsurance and to present an adjustment method to correct for this source of bias. Individuals or households are often classified as underinsured if out-of-pocket spending on medical care relative to income exceeds some threshold. We show that, without adjustment, this common threshold measure of underinsurance will underestimate the number with low levels of insurance coverage due to moral hazard. We propose an adjustment method and apply it to the specific case of estimating the difference in rates of underinsurance among small- versus large-firm workers with full-year, employer-sponsored insurance. Using data from the 2005 Medical Expenditure Panel Survey, we find that after applying the adjustment, the underinsurance rate of small-firm households increases by approximately 20% with the adjustment for moral hazard and the difference in underinsurance rates between large firm and small firm households widens substantially. Adjusting for moral hazard makes a sizeable difference in the estimated prevalence of underinsurance using a threshold measure.
    JEL: I10
    Date: 2009–10
  5. By: Pfarr, Christian; Schneider, Udo
    Abstract: In 2001, the voluntary additional Riester pension scheme was implemented in Germany. Financial subsidies should incentivize people to increase their private pension savings. In this paper, we hypothesize that these publicly subsidized savings mainly replace existing not subsidized savings and that supplier induced demand is an important factor. Using data from the Socio-economic Panel we analyze the key determinants in the choice of a Riester-pension. We find greater participation of those who already have life insurance or other public subsidied savings. Furthermore, we show that a contact with an insurance agent in the previous year is a major factor for the possession of a Riester-pension.
    Keywords: Riester-Rente; Demografie; angebotsinduzierte Nachfrage; Mitnahmeeffekt.
    JEL: H31 D12 J38
    Date: 2009–10–12
  6. By: Vecino Ortiz, Andrés Ignacio; Bardey, David; Castano-Yepes, Ramón
    Abstract: In the midst of health care reform, Colombia has succeeded in increasing health insurance coverage and the quality of health care. In spite of this, efficiency continues to be a matter of concern, and small-area variations in health care are one of the plausible causes of such inefficiencies. In order to understand this issue, we use individual data of all births from a Contributory-Regimen insurer in Colombia. We perform two different specifications of a multilevel logistic regression model. Our results reveal that hospitals account for 20% of variation on the probability of performing cesarean sections. Geographic area only explains 1/3 of the variance attributable to the hospital. Furthermore, some variables from both demand and supply sides are found to be also relevant on the probability of undergoing cesarean sections. This paper contributes to previous research by using a hierarchical model and by defining hospitals as cluster. Moreover, we also include clinical and supply induced demand variables.
    Date: 2009–10–04

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