nep-ias New Economics Papers
on Insurance Economics
Issue of 2011‒11‒21
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  2. The Oregon Health Insurance Experiment: Evidence from the First Year By Finkelstein, Amy, et al.
  3. The theorem of existence of the ruptures in probability scale and the basic question of insurance By Harin, Alexander
  4. THE REFORM OF THE PUBLIC HEALTH INSURANCE AND ECONOMIC GROWTH OF JAPAN By Toshihiro Ihori, Ryuta Ray Kato, Masumi Kawade, Shun-ichiro Bessho
  5. Predictors of customer loyalty in automobile insurance - The role of private information in risky driving behavior and claim history By Arvidsson, Sara
  6. Prices and Choices in the Swiss Health Care Insurance Market By Yves Ortiz
  7. Measuring the (Income) Effect of Disability Insurance Generosity on Labour Market Participation By Olivier Marie; Judit Vall Castello
  8. Intrahousehold Insurance and its Implications for Macroeconomic Outcomes. By [no author]

  1. By: D. Fabbri ;; C. Monfardini ;
    Abstract: We investigate whether people enrolled into voluntary health insurance (VHI) substitute public consumption with private (opt out) or just enlarge their private consumption, without reducing reliance upon public provisions (top up). We study the case of Italy, where a mixed insurance system is in place. To this purpose, we specify a joint model for public and private specialist visits counts, and allow for different degrees of endogenous supplementary insurance coverage, looking at the insurance coverage as driven by a trinomial choice process. We disentangle the effect of income and wealth by going through two channels: the direct impact on the demand for healthcare and that due to selection into VHI. We find evidence of opting out: richer and wealthier individuals consume more private services and concomitantly reduce those services publicly provided through selection into for-profit VHI. These results imply that the market for VHI eases the redistribution from high income (doubly insured) individuals to low income (not doubly insured) ones operated by the Italian National Health Service (NHS). Accounting for VHI endogeneity in the joint model of the two counts is crucial to this conclusion.
    Keywords: Public provision of private goods; health insurance; bivariate count data model; endogenous multinomial treatment; simultaneous equation modeling;
    JEL: C34 C35 D12 H44 I11
    Date: 2011–09
  2. By: Finkelstein, Amy, et al. (NBER)
    Abstract: In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid. This lottery provides a unique opportunity to gauge the effects of expanding access to public health insurance on the health care use, financial strain, and health of low-income adults using a randomized controlled design. In the year after random assignment, the treatment group selected by the lottery was about 25 percentage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically significantly higher health care utilization (including primary and preventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group.
    Date: 2011–10
  3. By: Harin, Alexander
    Abstract: The theorem of existence of the ruptures in the probability scale was proved in 2010. The theorem is used to analyze and to partially answer to the basic questions of insurance. The question is “To insure or not”. The goal of this paper is to reveal pure mathematical aspects of insurance processes and to analyze these aspects by pure mathematical methods, including application of the theorem. Its most significant result: when uncertainty increases, then taking the theorem into account may reverse insurant’s and insurer’s decisions to the opposite ones.
    Keywords: insurance; underwriting; probability; uncertainty; dispersion
    JEL: G22 C02
    Date: 2011–11–16
  4. By: Toshihiro Ihori, Ryuta Ray Kato, Masumi Kawade, Shun-ichiro Bessho
    Abstract: This paper evaluates one of the most drastic reforms of the Japanese public health insurance started in year 2006, by numerically examining the reform in an aging Japan in a dynamic context with overlapping generations within a computable general equilibrium framework. Our simulation results are as follows. First of all, an increase in the co-payment rate, which is one of the most prominent changes in the reform, would result in higher economic growth as well as higher welfare since it stimulates private savings. Secondly, the ex-post moral hazard behavior reduces economic growth. Thirdly, an increasing trend of the future public health insurance benefits can mainly be explained by an aging population, and an increase in the co-payment rate has little effect to reduce the public health insurance benefits in the future. Fourthly, the effect of a decrease in the medical cost, which could possibly be achieved by the improvement in efficiency in the public health insurance, the provision of more preventative medical services, or technological progress in the medical field, on the future burdens is very small. Finally, if the government implements a policy to keep the ratio of the public health insurance benefits to GDP constant, then the government has to keep reducing the public health insurance benefits over time, and the reduction rate should be 45 percent in year 2050. Such a policy also eventuates in lower economic growth until around year 2035. Our simulation results thus indicate that the reform is not so effective to reduce the future public health insurance benefits, but it can achieve higher economic growth and enhance welfare by stimulating private savings.
    JEL: C68 D58 E17 E62 H51 H55 H62 I18 O40
    Date: 2011
  5. By: Arvidsson, Sara (VTI)
    Abstract: Contract-relevant information asymmetries are known to cause inefficien-cies in markets. The information asymmetry is largest in the beginning of the customer-insurer relationship but reduces over time; the longer a poli-cyholder stays with the insurer the more the insurer learns about the poli-cyholder’s risk. Two important characteristics of the market studied here imply that the information asymmetry may not be reduced for all policy-holders. First, insurers do not have access to traffic violations, which are predictors of risk since policyholders with traffic violations are more likely to report a claim. Second, the insurers do not share information, such as previous claims, which means that the policyholder can flee a poor claim record by switching insurer. Hence, there may be a selection of high risk customers who switch insurer more often, such that the information asymmetry in this group is never reduced. To test this, we compare infor-mation asymmetries in two groups of policyholders; new customers who stay with the insurer for a period or less (short term), and long-term cus-tomers who stay with the insurer for several periods (loyal). The results indicate that departing policyholders are disproportionately high risks that constitute an adverse selection of risks, while loyal policyholders constitute a propitious (favorable) selection of risks.
    Keywords: Asymmetric information; insurance; accidents; adverse selection; propitious selection
    JEL: D82
    Date: 2011–11–16
  6. By: Yves Ortiz (Study Center Gerzensee)
    Abstract: We describe three different extensive data sets on the Swiss market for basic health care insurance—a homogeneous product by construction. First, we provide descriptive statistics on market prices for period 2004 - 2010. Second, we present aggregated data on health plan choices made by Swiss residents in the same period. Third, we describe and analyze an extensive survey executed in 2009 which documents health care plan and insurer choices of enrollees as well as their switching behavior. Price data reveal an increase of the mean price level and substantial and persistent price level differences across regions. We also observe a steady increase of price dispersion; contemporaneously, enrollees face an increasing number of operating companies. Indeed, we find a strong positive relation between regional price dis- persion, the regional price level and the number of operating companies. Although enrollees have moved to less expensive health care plans, our aggregate and survey data point to insuf- ficient price optimization on the part of the enrollees. Aggregate data disclose an increasing gap between the premia paid by enrollees and the lowest premia available in the respective submarket. Moreover, Swiss residents could have paid less on average if they had chosen their insurer randomly. Our Survey data confirm this observation: Despite large potential monetary gains, only 20% of the enrollees did switch their insurance company by the end of November 2009. In addition, many enrollees switched to more expensive insurance companies, thereby incurring negative monetary benefits.
    Date: 2011–11
  7. By: Olivier Marie; Judit Vall Castello
    Abstract: We analyze the employment effect of a law that provides for a 36 percent increase in the generosity of disability insurance (DI) for claimants who are, as a result of their lack of skills and of the labour market conditions they face, deemed unlikely to find a job. The selection process for treatment is therefore conditional on having a low probability of employment, making evaluation of its effect intrinsically difficult. We exploit the fact that the benefit increase is only available to individuals aged 55 or older, estimating its impact using a regression discontinuity approach. Our first results indicate a large drop in employment for disabled individuals who receive the increase in the benefit. Testing for the linearity of covariates around the eligibility age threshold reveals that the age at which individuals start claiming DI is not continuous: the benefit increase appears to accelerate the entry rate of individuals aged 55 or over. We obtain new estimates excluding this group of claimants, and find that the policy decreases the employment probability by 8 percent. We conclude that the observed DI generosity elasticity of 0.22 on labour market participation is mostly due to income effects since benefit receipt is not work contingent in the system studied.
    Keywords: Disability insurance, labour market participation, income effect, regression discontinuity
    JEL: J14 J26 J40
    Date: 2011–11
  8. By: [no author]
    Abstract: Most theoretical and empirical work on consumption, labor supply and saving decisions has been based on the paradigm that households behave as single agents. While this approach is often convenient, it relies on very restrictive assumptions. In recent years, there has been significant progress in developing a more satisfactory theory of decision making within households. The main contribution of this thesis is to explore the significance of intrahousehold risk sharing in the presence of uninsurable, idiosyncratic risk. If individuals are unable to rely on complete asset markets, the extent to which they can cope with uncertainty crucially hinges on the set of risk sharing channels. Despite its vast empirical significance, insurance from the family as one of these channels has mostly been overlooked in the literature. The first chapter investigates the significance of family insurance for savings and labor supply. An economy in which individuals can share risk within households generates aggregate precautionary savings that are substantially smaller than in a similar economy that lacks access to insurance from the family. Intrahousehold risk sharing has its largest impact among wealthpoor households. While the wealth-rich use mainly savings to smooth consumption across unemployment spells, wealth-poor households rely on spousal labor supply. The second chapter documents some stylized facts for the distributions of earnings and wealth across single and married households and presents a theoretical framework that can successfully account for the data. Assortative matching, the effective tax bonus for married couple and directed bequests are found to be key determinants for higher per-capita earnings and net worth among married individuals. The third chapter explores how intrahousehold insurance interacts with the design of unemployment benefit programs. My findings indicate that fiscal policy can take very distinct effects depending on whether intra-household risk sharing is available or not. I also find potential efficiency gains from gender-based taxation.
    Date: 2011

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