nep-ias New Economics Papers
on Insurance Economics
Issue of 2010‒06‒04
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Die Schweiz als Vorbild? Bemerkungen zur Diskussion um eine Reform des deutschen Gesundheitswesens By Gebhard Kirchgässner
  2. Applications of time-delayed backward stochastic differential equations to pricing, hedging and management of insurance and financial risks By Lukasz Delong
  3. Incentive Compatible Reimbursement Schemes for Physicians By Winand Emons
  4. Is there a distress risk anomaly ? corporate bond spread as a proxy for default risk By Anginer, Deniz; Yildizhan, Celim

  1. By: Gebhard Kirchgässner
    Abstract: Taking into account the Swiss experience, this paper considers some aspects of the current reform discussion concerning the German health insurance system. The income dependence of effective premia, their size and their distributional consequences are discussed. The potential role of competition is also considered. It is shown that there are only gradual but no systematic differences between the current German and Swiss systems with respect to their labour market consequences that are central to the present German discussion, while those aspects where the two systems really differ are rarely ever discussed, and the planned new German system will hardly differ in these other dimensions from the old one.
    Keywords: Health insurance, Germany Switzerland
    JEL: I11 I18
    Date: 2010–05
  2. By: Lukasz Delong
    Abstract: In this paper we investigate novel applications of a new class of equations which we call time-delayed backward stochastic differential equations. We show that many pricing and hedging problems concerning structured products, participating products or variable annuities can be handled by this equations. Time-delayed BSDEs may appear when we want to find a strategy and a portfolio which should replicate the liability whose pay-off depends on the applied investment strategy or the values of the portfolio. This is usually the case for investment funds or life insurance investment contracts which have bonus distribution mechanisms or provide protection against low returns. We consider some life insurance products, derive the corresponding time-delayed BSDEs and solve them explicitly or at least provide hints how to solve them numerically. We investigate perfect hedging and quadratic hedging which is crucial for insurance applications. We study consequences and give an economic interpretation of the fact that a time-delay BSDE may not have a solution or may have multiple solutions.
    Date: 2010–05
  3. By: Winand Emons
    Abstract: We consider physicians with fixed capacity levels. If a physician's capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she may undertreat, i.e., she may not provide necessary treatments since other activities are financially more attractive. We first show that simple fee-for-service reimbursement schemes do not provide proper incentives. If insurers use, however, fee-for-service schemes with quantity restrictions, they solve the fraudulent physician problem.
    Keywords: credence goods; expert services; incentives; medical doctors; demand inducement; insurance
    JEL: D82 I11
    Date: 2010–01
  4. By: Anginer, Deniz; Yildizhan, Celim
    Abstract: Although financial theory suggests a positive relationship between default risk and equity returns, recent empirical papers find anomalously low returns for stocks with high probabilities of default. The authors show that returns to distressed stocks previously documented are really an amalgamation of anomalies associated with three stock characteristics -- leverage, volatility and profitability. In this paper they use a market based measure -- corporate credit spreads -- to proxy for default risk. Unlike previously used measures that proxy for a firm's real-world probability of default, credit spreads proxy for a risk-adjusted (or a risk-neutral) probability of default and thereby explicitly account for the systematic component of distress risk. The authors show that credit spreads predict corporate defaults better than previously used measures, such as, bond ratings, accounting variables and structural model parameters. They do not find default risk to be significantly priced in the cross-section of equity returns. There is also no evidence of firms with high default risk delivering anomalously low returns.
    Keywords: Debt Markets,Mutual Funds,Economic Theory&Research,Bankruptcy and Resolution of Financial Distress,Deposit Insurance
    Date: 2010–05–01

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