nep-ias New Economics Papers
on Insurance Economics
Issue of 2012‒03‒14
three papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Measuring the effects of removing subsidies for private insurance on public expenditure for health care By Chai Cheng, T.
  2. Perceptions of (Micro)Insurance in Southern Ghana: The Role of Information and Peer Effects By Lena Giesbert; Susan Steiner
  3. The Effect of Secondary Markets on Equity-Linked Life Insurance with Surrender Guarantees By Christian Hilpert; Jing Li; Alexander Szimayer

  1. By: Chai Cheng, T.
    Abstract: This paper investigates the effects of removing subsidies for private health insurance on public sector expenditure for hospital care. An econometric framework using simultaneous equation models is developed to analyse the interrelated decisions on the intensity and type of health care use and insurance. The results indicate that while privately insured individuals are more likely to seek hospital care as a private patient, they do not differ in their intensity of hospital care use compared with those without private insurance. The simulation results suggest that eliminating subsides could potentially yield substantial public sector savings.
    Keywords: Demand for Hospital Care; Private Insurance; Bivariate count data models; Simultaneous equation models; Policy simulation;
    JEL: I11 H42 C31 C15
    Date: 2011–10
  2. By: Lena Giesbert; Susan Steiner
    Abstract: This article investigates the understandings and perceptions of (micro)insurance among low-income people in southern Ghana, using evidence from four focus group discussions. It analyzes how the focus group participants think about various types of insurance - among them a micro life insurance product - and how their negative and/or positive evaluations have come about. The evidence indicates that (micro)insurance is mostly positively perceived by the participants of the focus group discussions. However, it is also found that many people's image of insurance is based on incomplete (and sometimes erroneous) information, or even on intuition. In addition, the experiences or opinions of peers turn out to be critical in shaping an individual's perception of insurance. These two factors potentially have a contagious effect, which can lead to unreasonably positive or overly negative ideas about (micro)insurance. Such ideas, in turn, can become detrimental to the further distribution of microinsurance.
    Keywords: Microinsurance, risk management, perception, Ghana, focus groups
    JEL: G22 O16
    Date: 2012
  3. By: Christian Hilpert; Jing Li; Alexander Szimayer
    Abstract: We study the effect of secondary markets on equity-linked life insurance contracts with surrender guarantees. The policyholders are assumed to be boundedly rational in giving up their contracts, and a proportion of policyholders will access the secondary markets instead of surrendering the contracts to the insurance company. We formulate the valuation problems from both the insurance company's and the policyholders' perspectives and characterize the contract values by deriving the respective pricing PDEs. Comparative statics are derived indicating the effect of the level of the policyholder's rationality and secondary market characteristics such as accessibility and competition on the contract values. The pricing PDEs are solved numerically via the Crank-Nicolson scheme to study the implication of the inclusion of a secondary market. We show that a secondary market generally increases the risk borne by the insurance company and the policyholders profit from the secondary market only when the secondary market is sufficiently competitive. Furthermore, we derive the necessary condition for the existence of a fair contract in this context and study the effect of the secondary market on fair contract design.
    Keywords: equity-linked life insurance contracts, surrender guarantee, bounded rationality, fair contract analysis, secondary market
    JEL: G13 G22 C65
    Date: 2011–09

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