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on Insurance Economics |
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Issue of 2011‒08‒02
eight papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Hill, Ruth Vargas; Hoddinott, John; Kumar, Neha |
| Abstract: | In this paper we examine which farmers would be early entrants into weather index insurance markets in Ethiopia, were such markets to develop on a large scale. We do this by examining the determinants of willingness to pay for weather insurance among 1,400 Ethiopian households that have been tracked for 15 years as part of the Ethiopia Rural Household Survey. This provides both historical and current information with which to assess the determinants of demand. We find that educated, rich, and proactive individuals were more likely to purchase insurance. Risk aversion was associated with low insurance take-up, suggesting that models of technology adoption can inform the purchase and spread of weather index insurance. We also assess how willingness to pay varied as two key characteristics of the contract were varied and find that basis risk reduced demand for insurance, particularly when the price of the contract was high, and that provision of insurance through groups was preferred by women and individuals with lower levels of education. |
| Keywords: | index-insurance, Risk, Willingness to pay (WTP), |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1088&r=ias |
| By: | Jean M. Abraham; Anne Beeson Royalty; Thomas DeLeire |
| Abstract: | We develop an empirical method to assess the generosity of employer-sponsored insurance across groups within the U.S. population. A key feature of this method is its simplicity – it only requires data on out-of-pocket (OOP) health care spending and total health care spending and does not require detailed knowledge of health insurance benefit design. We apply our method to assess whether households with a chronically ill member have more or less generous insurance relative to households with no chronically ill members. We find that the chronically ill have less generous insurance coverage than the non-chronically ill. Additional analyses suggest that the reason for this less generous coverage is not that households with a chronically ill member are in different, less generous plans, on average. Rather, households with a chronically ill member have higher spending on certain types of medical services (e.g., pharmaceutical drugs) that are covered less generously by insurance. Given recent work on value-based insurance design and coinsurance as an obstacle to medication adherence, our findings suggest that the current design of health plans may put the health and financial well-being of the chronically ill at risk. |
| JEL: | I1 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17232&r=ias |
| By: | Zhang, Yue-hua; Li, Chu-Shiu; Liu, Chwen-Chi; Chen, Kevin Z. |
| Abstract: | Using agricultural household survey data and claim records from insurers for the year 2009, this paper analyzes hog producers' choice of means of loss prevention and identifies the relationships among biosecurity practices, vaccination, and hog insurance. By combining one probit and two structural equations, we adopt three-stage estimations on a mixed-process model to obtain the results. The findings indicate that biosecurity practices provide the basic infrastructure for operating pig farms and complement both the usage of quality vaccines and the uptake of hog insurance. In addition, there is a strong relationship of substitution between quality of vaccine and demand for hog insurance. Hog farmers that implement better biosecurity practices are more likely to seek high-quality vaccines or buy into hog insurance schemes but not both. For those households with hog insurance, better biosecurity status, better management practices, and higher-quality vaccine significantly help to reduce loss ratios. However, we also find a moral hazard effect in that higher premium expenditure by the insured households might induce larger loss ratios. |
| Keywords: | Biosecurity, hog insurance, loss prevention, vaccine, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1083&r=ias |
| By: | Hill, Ruth Vargas; Robles, Miguel |
| Abstract: | We analyze the effectiveness of a new approach in providing weather index–based insurance products to low-income populations. The approach is based on the concept of providing multiple weather securities that pay a fixed amount if the event written on the security (that monthly rainfall at a nearby weather station falls below a stated cutoff) comes true. A theoretical model is developed to outline the conditions in which weather securities could outperform crop-specific weather index–based insurance policies. Data collected during both an experimental game and real purchases of such insurance policies among farmers in southern Ethiopia suggest that the securities are well understood and can fit heterogeneous farmer needs. This paper documents (1) heterogeneity of rainfall risk among farmers, (2) the understanding of securities and transmission of information about weather securities among members of endogenously formed risk-sharing groups, and (3) the nature of purchasing decisions and manner in which they are made. |
| Keywords: | Arrow securities, weather index insurance, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1092&r=ias |
| By: | Abe Dunn (Bureau of Economic Analysis) |
| Abstract: | This paper examines the impact of coverage on demand for health insurance in the Medicare Advantage (MA) insurance market. Estimating the e¤ects of coverage on demand poses a challenge for researchers who must must consider both the hundreds of bene.ts that a¤ect out-of-pocket costs (OOPC) to consumers, but also the endogeneity of coverage. These problems are addressed in a discrete choice demand model by employing a unique measure of OOPC that considers a consumer.s expected payments for a .xed bundle of health services and applying instrumental variable techniques to address potential endogneity bias. The results of the demand model show that OOPC have a signi.cant e¤ect on consumer surplus and that not instrumenting for OOPC results in a signi.cant underestimate of the value of coverage. |
| JEL: | E60 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:bea:wpaper:0061&r=ias |
| By: | Gijs Roelofs; Daniel van Vuuren |
| Abstract: | <p>In this paper, we assess spillover effects of Social Assistance (SA) decentralization in the Netherlands, in particular towards (a centrally administered) Disability Insurance scheme (DI). DI enrolment has increased strongly since the decentralization of SA. </p><p>Many economists and policymakers believe that fiscal decentralization, the decentralization of government expenditures to local governments, enhances public sector efficiency. Vertical externalities – i.e. spillovers between local and central government – may however undo part of this advantage. In this paper, we assess spillover effects of Social Assistance (SA) decentralization in the Netherlands, in particular towards (a centrally administered) Disability Insurance scheme (DI). DI enrolment strongly increased since the decentralization of SA. We find that the sensitivity of local DI enrolment with respect to the stock of local SA recipients has increased over time, given that we control for both observed and unobserved disability risk factors. IV estimates show that, since the decentralization of SA, at least one third of DI inflow was diverted from SA.</p> |
| JEL: | H40 H53 H70 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:185&r=ias |
| By: | de Brauw, Alan; Mueller, Valerie; Woldehanna, Tassew |
| Abstract: | Migration and remittances can be used by rural households as a means of insurance, investment, and income augmentation. Ample attention has been given to studying international remittance flows, since for many countries such transfers comprise a significant fraction of income. Remittance flows from internal migrants are relatively understudied, particularly in Africa, where remittance rates are poor. We use a unique matched migrant sample to study what drives the low remittance rates in Ethiopia. Descriptive statistics suggest remitters are positively selected in terms of wealth characteristics compared with the average tracked migrant. Limited skill transferability and liquidity largely explain low remittance rates in Ethiopia. Weaker evidence suggests migrants are additionally motivated to remit as a form of self-insurance against own shocks to income and investments towards future inheritable assets. |
| Keywords: | Insurance, Migration, Remittances, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1090&r=ias |
| By: | Beck, T.H.L.; De Jonghe, O.G.; Schepens, G. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper documents a large cross-country variation in the relationship between bank competition and stability and explores market, regulatory and institutional features that can explain this heterogeneity. Combining insights from the competition-stability and regulation-stability literatures, we develop a unified framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor the charter-value paradigm or the risk-shifting paradigm. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more homogenous market structures, more generous deposit insurance and more effective systems of credit information sharing. |
| Keywords: | Competition;Stability;Banking;Herding;Deposit Insurance;Information Sharing;Risk Shifting. |
| JEL: | G21 G28 L51 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011080&r=ias |