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on Insurance Economics |
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Issue of 2013‒01‒26
five papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Piet Bakx (Erasmus University Rotterdam); Erik Schut (Erasmus University Rotterdam); Eddy van Doorslaer (Erasmus University Rotterdam) |
| Abstract: | When public long-term care (LTC) insurance is provided by insurers, they typically lack incentives for purchasing cost-effective LTC. Providing insurers with appropriate incentives for efficiency without jeopardizing access for high-risk individuals requires, among other things, an adequate system of risk adjustment. While risk adjustment is now widely adopted in health insurance, it is unclear whether adequate risk adjustment is feasible for LTC because of its specific features. We examine the feasibility of risk adjustment for LTC insurance using a rich set of linked nationwide Dutch administrative data. Prior LTC use and demographic information are found to explain much of the variation, while prior health care expenditures are important in reducing predicted losses for subgroups of health care users. Nevertheless, incentives for risk selection against some easily identifiable subgroups persist. Moreover, using prior utilization and expenditure as risk adjusters dilutes incentives for efficiency, but using multiyear data may reduce this disadvantage. |
| Keywords: | risk adjustment; long-term care; managed competition; public insurance |
| JEL: | H51 I11 I18 L13 |
| Date: | 2013–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20130017&r=ias |
| By: | Acharya, Arnab; Vellakkal, Sukumar; Taylor Fiona; Masset Edoardo; Satija, Ambika; Burke, Margaret; Ebrahim, Shah |
| Abstract: | This paper summarizes the literature on the impact of state subsidized or social health insurance schemes that have been offered, mostly on a voluntary basis, to the informal sector in low- and middle-income countries. A substantial number of papers provide estimations of average treatment on the treated effect for insured persons. The authors summarize papers that correct for the problem of self-selection into insurance and papers that estimate the average intention to treat effect. Summarizing the literature was difficult because of the lack of (1) uniformity in the use of meaningful definitions of outcomes that indicate welfare improvements and (2) clarity in the consideration of selection issues. They find the uptake of insurance schemes, in many cases, to be less than expected. In general, we find no strong evidence of an impact on utilization, protection from financial risk, and health status. However, a few insurance schemes afford significant protection from high levels of out-of-pocket expenditures. In these cases, however, the impact on the poor is weaker. More information is needed to understand the reasons for low enrollment and to explain the limited impact of health insurance among the insured. |
| Keywords: | Health Monitoring&Evaluation,Health Systems Development&Reform,Health Economics&Finance,Health Law,Insurance&Risk Mitigation |
| Date: | 2013–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6324&r=ias |
| By: | Andrew Beauchamp (Boston College); Mathis Wagner (Boston College) |
| Abstract: | Despite facing some of the same challenges as private insurance markets, little is known about the role of adverse selection in social insurance programs. This paper studies adverse selection in Social Security retirement choices using data from the Health and Retirement Study. We find robust evidence that people who live longer choose larger annuities by delaying the age they first claim benefits, a form of adverse selection. To quantify welfare consequences we develop and estimate a simple model of annuity choice. We exploit variation in longevity, the underlying source of private information, to identify the key structural parameters: the coefficient of relative risk aversion and the discount rate. We estimate that adverse selection reduces social welfare by 2.3-3.5 percent, and increases the costs to the Social Security Trust Fund by 2.1-2.5 percent, relative to the first best allocation. Counterfactual simulations suggest program adjustments could generate both economically significant decreases in costs and small increases in social welfare. We estimate an optimal non-linear accrual rate which would result in welfare gains of 1.4 percent, and cost reductions of 6.1 percent of current program costs. |
| Keywords: | Adverse Selection, Social Security, Optimal Policy |
| JEL: | J26 D82 |
| Date: | 2012–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:818&r=ias |
| By: | Afrasiab Mirza |
| Abstract: | This paper investigates regulations for banks that covered by deposit insurance in a dynamic setting where bankruptcy entails social costs. Regulatory policy operates through rules governing the bank's capital structure and asset allocation that may be adjusted each period. Throughout, the regulator must take into account that the bank is better informed about the inherent risks of its assets (adverse selection) and may forgo unobservable and costly actions to improve asset quality (moral hazard). Under the optimal regulatory policy under banks face risk-adjusted capital requirements but also hard-caps on size and leverage. In addition, the optimal policy counteracts pro-cyclical bank behaviour through the use of capital buffers. |
| Keywords: | Capital Regulation, Deposit Insurance, Risk-shifting |
| JEL: | G2 G3 G21 G28 G32 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:12-13&r=ias |
| By: | Maria Dementyeva (VU University Amsterdam); Paul R. Koster (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam) |
| Abstract: | Accident externalities are among the most important external costs of road transport. We study the regulation of these when insurance companies have market power. Using analytical models, we compare a public-welfare maximizing monopoly with a private profit-maximizing monopoly, and markets where two or more firms compete. A central mechanism in the analysis is the accident externality that individual drivers impose on one another via their presence on the road. Insurance companies will internalize some of these externalities, depending on their degree of market power. We derive optimal insurance premiums, and "manipulable" taxes that take into account the response of the firm to the tax rule applied by the government. Furthermore, we study the taxation of road users under different assumptions on the market structure. We illustrate our analytical results with numerical examples, in order to better understand the determinants of the relative performance of different market structures. |
| Keywords: | accident externalities; traffic regulation; safety; second-best; market power |
| JEL: | D43 D62 R41 R48 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20130019&r=ias |