nep-ias New Economics Papers
on Insurance Economics
Issue of 2012‒10‒20
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Impact of the Partnership Long-term Care Insurance Program on Private Coverage and Medicaid Expenditures By Haizhen Lin; Jeffrey T. Prince
  2. Adverse selection in a community-based health insurance scheme in rural Africa: implications for introducing targeted subsidies. By Parmar, Divya; Souares, Aurélia; de Allegri, Manuela; Savadogo, Germain; Sauerborn, Rainer
  3. Experience rating in non-life insurance By Jean Pinquet
  4. Classifying OECD healthcare systems: A deductive approach By Böhm, Katharina; Schmid, Achim; Götze, Ralf; Landwehr, Claudia; Rothgang, Heinz
  5. Parametric Bootstrap Tests for Futures Price and Implied Volatility Biases with Application to Rating Livestock Margin Insurance for Dairy Cattle By Bozic, Marin; Newton, John; Thraen, Cameron S.; Gould, Brian W.
  6. Liquidity Coinsurance and Bank Capital By Castiglionesi, Fabio; Feriozzi, Fabio; Lóránth, Gyöngyi; Pelizzon, Loriana

  1. By: Haizhen Lin (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: We examine the impact of U.S. states’ adoption of the partnership long-term care (LTC) insurance program on households’ purchases of private coverage. This program increases benefits of privately insuring via a higher asset threshold for Medicaid eligibility for LTC coverage, and targets middle-class households. We find the program generates few new purchases of LTC insurance, and those it generates are almost entirely by wealthy individuals, as predicted by Medicaid crowd-out. Further analysis suggests that awareness levels of the program, along with bequest intentions, also effectively predict response rates, but Medicaid crowd-out persists. We provide an estimate of expected Medicaid savings/costs.
    JEL: I1
    Date: 2012–04
  2. By: Parmar, Divya; Souares, Aurélia; de Allegri, Manuela; Savadogo, Germain; Sauerborn, Rainer
    Abstract: Background Although most community-based health insurance (CBHI) schemes are voluntary, problem of adverse selection is hardly studied. Evidence on the impact of targeted subsidies on adverse selection is completely missing. This paper investigates adverse selection in a CBHI scheme in Burkina Faso. First, we studied the change in adverse selection over a period of 4 years. Second, we studied the effect of targeted subsidies on adverse selection. Methods The study area, covering 41 villages and 1 town, was divided into 33 clusters and CBHI was randomly offered to these clusters during 2004–06. In 2007, premium subsidies were offered to the poor households. The data was collected by a household panel survey 2004–2007 from randomly selected households in these 33 clusters (n = 6795). We applied fixed effect models. Results We found weak evidence of adverse selection before the implementation of subsidies. Adverse selection significantly increased the next year and targeted subsidies largely explained this increase. Conclusions Adverse selection is an important concern for any voluntary health insurance scheme. Targeted subsidies are often used as a tool to pursue the vision of universal coverage. At the same time targeted subsidies are also associated with increased adverse selection as found in this study. Therefore, it’s essential that targeted subsidies for poor (or other high-risk groups) must be accompanied with a sound plan to bridge the financial gap due to adverse selection so that these schemes can continue to serve these populations.
    Date: 2012
  3. By: Jean Pinquet (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This paper presents statistical models which lead to experience rating in insurance. Serial correlation for risk variables can receive endogeneous or exogeneous explanations. The interpretation retained by actuarial models is exogeneous and reflects the positive contagion usually observed for the number of claims. This positive contagion can be explained by the revelation throughout time of a hidden features in the risk distributions. These features are represented by fixed effects which are predicted with a random effects model. This article discusses identification issues on the nature of the dynamics of non-life insurance data. Example of predictions are given for count data models with a constant or time-varying random effects, one or several equations, and for cost-number models on events.
    Keywords: Fixed and random effects ; overdispersion ; expected value principle ; linear credibility approach.
    Date: 2012–03–07
  4. By: Böhm, Katharina; Schmid, Achim; Götze, Ralf; Landwehr, Claudia; Rothgang, Heinz
    Abstract: This paper is a first attempt to classify 30 OECD healthcare systems according to a typology developed by Rothgang et al. (2005) and elaborated by Wendt et al. (2009). The typology follows a deductive approach. It distinguishes three core dimensions of the healthcare system: regulation, financing, and service provision. Moreover, three types of actors are identified based on long-standing concepts in social research: the state, societal actors, and market participants. Uniform or ideal-type combinations unfold if all dimensions are dominated by the same actor, either belonging to the state, society, or the market. Further, we argue, there is a hierarchical relationship between the dimensions of the healthcare system, led by regulation, followed by financing, and last service provision, where the superior dimension restricts the nature of the subordinate dimensions. This hierarchy limits the number of theoretically plausible healthcare system types within the logic of the deductive typology. The classification of 30 countries according to their most recent institutional setting results in five healthcare system types: the National Health Service, the National Health Insurance, the Social Health Insurance, the Etatist Social Health Insurance, and the Private Health System. Of particular relevance are the National Health Insurance and the Etatist Social Health Insurance both of which include countries that have often provoked caveats when allocated to a specific family of healthcare systems. Moreover, Slovenia stands out as a special case. The findings are discussed with respect to alternative taxonomies, explanatory factors for the position of single countries and most likely trends. -- Dieses Paper ist ein erster Versuch 30 OECD-Gesundheitssysteme anhand einer Typologie zu klassifizieren, die von Rothgang et al. (2005) vorgestellt und von Wendt et al. (2009) weiterentwickelt wurde. Im Gegensatz zu bestehenden Taxonomien folgt diese Typologie einem deduktiven Ansatz. Sie unterscheidet zwischen den drei Kerndimensionen eines Gesundheitssystems: Regulierung, Finanzierung und Leistungserbringung. Darüber hinaus werden auf Grundlage bestehender sozialwissenschaftlicher Konzepte drei Akteure unterschieden: Staat, gesellschaftliche Akteure und Marktteilnehmer. Idealtypische Konstellationen treten auf, wenn alle Dimensionen vom gleichen Akteur (Staat, Gesellschaft oder Markt) dominiert werden. Wir argumentieren zudem, dass es eine hierarchische Beziehung zwischen den drei Dimensionen gibt. Dabei nimmt die Regulierung die übergeordnete Stellung ein, gefolgt von der Finanzierung und schließlich der Leistungserbringung, wobei die Ausprägung vorrangiger Dimensionen die Ausgestaltungsoptionen der nachrangingen limitiert. Diese Hierarchie reduziert die Zahl der theoretisch plausiblen Gesundheitssystemtypen im Rahmen des deduktiven Ansatzes. Die Klassifizierung von 30 OECD-Ländern anhand ihrer gegenwärtigen institutionellen Ausprägungen führt zu fünf Gesundheitssystemtypen: Nationaler Gesundheitsdienst, nationales Krankenversicherungssystem, Sozialversicherungssystem, etatistisches Sozialversicherungssystem und privates Gesundheitssystem. Von besonderer Bedeutung sind die Typen nationales Krankenversicherungssystem und etatistisches Sozialversicherungssystem da beide in Staaten auftreten, deren Zuordnung zu bestimmten Gesundheitssystemtypen bisher umstritten war. Darüber hinaus sticht Slowenien als Ausnahmefall aus dem Ländersample hervor. Die Ergebnisse werden im Hinblick auf alternative Typologien, mögliche Erklärungsfaktoren für die Einordung einzelner Länder und wahrscheinliche Entwicklungstrends diskutiert.
    Date: 2012
  5. By: Bozic, Marin; Newton, John; Thraen, Cameron S.; Gould, Brian W.
    Abstract: A common approach in the literature, whether the investigation is about futures price risk premiums or biases in option-based implied volatility coefficients, is to use samples in which consecutive observations can be regarded as uncorrelated. That will be the case for non- overlapping forecast horizons constructed by either focusing on short time-to-maturity contracts or excluding some data. In this article we propose a parametric bootstrap procedure for uncovering futures and options biases in data characterized by overlapping horizons and correlated prediction errors. We apply our method to test hypotheses that futures prices are efficient and unbiased predictors of terminal prices, and that squared implied volatility, multiplied by time left to option expiry, is an unbiased predictor of terminal log-price variance. We apply the test to corn, soybean meal and Class III milk futures and options data for the period 2000-2011. We find evidence for downward bias in soybean meal futures, as well as downward volatility bias in Class III milk options. Importance of these results is illustrated on the example of premium determination for Livestock Gross Margin Insurance for Dairy Cattle (LGM-Dairy).
    Keywords: parametric bootstrap, risk premium, volatility bias, revenue insurance, LGM-Dairy, Demand and Price Analysis, Research Methods/ Statistical Methods, Risk and Uncertainty,
    Date: 2012–10
  6. By: Castiglionesi, Fabio; Feriozzi, Fabio; Lóránth, Gyöngyi; Pelizzon, Loriana
    Abstract: Banks can deal with their liquidity risk by holding liquid assets (self-insurance), by participating in the interbank market (coinsurance), or by using flexible financing instruments, such as bank capital (risk-sharing). We study how the access to an interbank market affects banks' incentive to hold capital. A general insight is that from a risk-sharing perspective it is optimal to postpone payouts to capital investors when a bank is hit by a liquidity shock that it cannot coinsure on the interbank market. This mechanism produces a negative relationship between interbank activity and bank capital. We provide empirical support for this prediction in a large sample of U.S. commercial banks, as well as in a sample of European and Japanese commercial banks.
    Keywords: Bank Capital; Interbank Markets; Liquidity Coinsurance.
    JEL: G21
    Date: 2012–10

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