nep-ias New Economics Papers
on Insurance Economics
Issue of 2011‒11‒07
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Is your money safe? What Italians know about deposit insurance By Laura Bartiloro
  2. Traffic violations and insurance data – a note on the role of age, gender, annual mileage and vehicle brand By Arvidsson, Sara
  3. Market discipline by depositors : impact of deposit insurance on the Indonesian banking sector By Hamada, Miki
  4. The New Cooperative Medical Scheme (NCMS) and its implications for access to health care and medical expenditure: Evidence from rural China By Liu, Dan; Tsegai, Daniel W.
  5. Is there a role for funding in explaining recent US bank failures? By Pierluigi Bologna
  6. Vulnerability of Household Consumption to Village-level Aggregate Shocks in a Developing Country By Kurosaki, Takashi

  1. By: Laura Bartiloro (Banca d'Italia)
    Abstract: The recent financial crisis has revived the debate on deposit insurance. Public awareness of its existence is essential in order to prevent a bank run. Analysing the results of three questions on this topic introduced in the last Survey on Household Income and Wealth, this paper investigates knowledge of the existence of the Italian deposit insurance scheme and its main characteristics among a sample of households. Evidence shows that knowledge of deposit insurance is poor: 70 per cent of the households in the sample are completely unaware of its existence, 23 per cent possess only basic knowledge, and just 7 per cent have detailed information. The available data allow us to outline possible determinants of deposit insurance awareness: the results highlight the importance of the Internet and of income and education, as expected; in addition, men seem to be better informed than women.
    Keywords: deposit insurance, public awareness
    JEL: G28 G21
    Date: 2011–10
  2. By: Arvidsson, Sara (VTI)
    Abstract: Risky driving behavior is regarded as being one of the best predictors of traffic accidents. Traffic violations certainly signal risky driving behvior, but the analysis of the linkage of traffic violations, individual and vehicle characteristics and annual mileage has so far been hampered by the difficulty of gaining access to appropriate disaggregate data. The contriburion of this paper is that it sets out and explores a rich data set in order to study traffic violotions, including both accident-involved and accident-free individuals. The data set comprises att insurance poicies from Sweden's largest automobile insurance company covering several years, in total 9.3 million observations, as well as information on fines and convictions for traffic violations. This implies that the methodological issues associated with self-reported violotions and only accident-involved individuals are disused. The first purpose is to extablish the role of age and gender in traffic violations. The results support previous findings as well as confirms the association between owners of status brands and traffic violations. The main conclusion is that insurance data rpvides a vialble option when studying behavior, but it also raises new methodological issues.
    Keywords: Insurance; asymmetric information; accidents; traffic violations; automobile brand
    JEL: D82
    Date: 2011–11–02
  3. By: Hamada, Miki
    Abstract: This paper investigates market discipline by depositors in the Indonesian banking sector. Does depositor discipline fulfill its role in Indonesia? Does deposit insurance affect depositor behavior thereby imposing discipline on banks? These questions are empirically examined using panel data on Indonesian commercial banks from 1998 to 2009. In Indonesia deposit insurance was introduced in 2005. Depositor discipline is examined by two measures: change in the amount of deposits and interest rate. The empirical results show that depositors pay attention to bank soundness and riskiness and select banks based on the bank's condition with particular attention paid to equity ratio. It is found that depositors impose discipline on banks, but it varies according to regulatory and economic circumstances.
    Keywords: Indonesia, Banks, Insurance, Deposit insurance, Market discipline, Depositor discipline
    JEL: G21 G28 G30
    Date: 2011–03
  4. By: Liu, Dan; Tsegai, Daniel W.
    Abstract: The New Cooperative Medical Scheme (NCMS) program was implemented in response to âillness-led povertyâ and poor state of healthcare in rural China. Supported by government subsidy, more and more poor rural households are now enrolled in the NCMS. This paper investigates the impact of the NCMS program on improving health care utilization and reducing medical expenditure with a specific focus on the endeavors to unravel the heterogeneous effects of the program for the different regions and income groups. We utilize the China Health and Nutrition Survey data (CHNS) to provide prolific cross section and longitudinal information. A total sample of 6,293 individuals and 2,058 households are included in the analysis. Propensity score matching method and bounding approach are used to infer the causal effect of NCMS and examine the influence of unobservable factors respectively. Major findings indicate that there is a systematic adverse selection in the NCMS program, both in health- and economic-related aspects. Especially in western regions, households with high ratio of migrant workers are less attracted to the NCMS program. The NCMS program improved medical care utilization for the poor and regionally, western regions benefitted more from the program. The NCMS program also induces a moral hazard problem in western regions.
    Keywords: rural China, health insurance, impact evaluation, propensity score matching, Health Economics and Policy,
    Date: 2011–10
  5. By: Pierluigi Bologna (Banca d'Italia)
    Abstract: This paper tests the role of different banks’ liquidity funding structures in explaining the bank failures that occurred in the United States between 2007 and 2009. The results highlight that funding is indeed a significant factor in explaining banks’ probability of default. By confirming the role of funding as a driver of banking crisis, the paper also recognizes that the new liquidity framework proposed by the Basel Committee on Banking Supervision appears to have the features needed to strengthen banks’ liquidity conditions and improve financial stability. Its correct implementation, together with closer supervision of banks’ liquidity and funding conditions, appear decisive, however, if such improvements are to be achieved.
    Keywords: banks, default, crises, liquidity, funding, brokered deposits, liquidity regulation, deposit insurance, United States
    JEL: G20 G21 G28
    Date: 2011–10
  6. By: Kurosaki, Takashi
    Abstract: Village-level aggregate shocks such as droughts and floods cannot be perfectly insured by risk sharing within a village. Then, what type of households are more vulnerable in terms of a decline in consumption when a village is hit by such natural disasters? This question is investigated in this study by using two-period panel data for the years 2001 and 2004 from rural Pakistan. We propose a methodology to infer the theoretical mechanisms underlying the heterogeneity of households in terms of their vulnerability, and focus on the difference between the across-household-type difference in marginal response to aggregate shocks and that in marginal response to idiosyncratic shocks. The empirical results obtained indicate that the sensitivity of consumption changes to shocks differs across household types, depending on the type of natural disasters. Moreover, land and credit access are effective in mitigating the ill-effects of various types of shocks. Household heads who are educated or elderly and households with a greater number of working members bear a larger burden of the village-level shocks; however, they are not vulnerable to idiosyncratic health shocks. It is revealed that these patterns may be explained by the coexistence of unequal access to credit markets and risk sharing among heterogeneous households in terms of risk tolerance.
    Keywords: natural disaster, consumption smoothing, risk sharing, self-insurance, Pakistan
    JEL: O12 D12 D91
    Date: 2011–02

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