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on Insurance Economics |
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Issue of 2013‒07‒05
thirteen papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Damien S.Eldridge (School Economics, La Trobe University; University of South Australia; Independent Researcher; SSenior Economist, Cornerstone Research, USA) |
| Abstract: | We use the 2004-'05 wave of the Australian National Health Survey to estimate the impact of private hospital insurance on the propensity for hospitalization as a private patient. We employ instrumental-variable methods to account for the endogeneity of supplementary private hospital insurance purchases. We calculate moral hazard based on a dierence-of-means estimator. We decompose the moral hazard estimate into a diversion component that is due to an insurance-induced substitution away from public patient care towards private patient care, and an expansion component that measures a pure insurance-induced increase in the propensity to seek private patient care. We nd some evidence of self-selection into insurance but this nding is not robust to alternative specications. Our results suggest that on average, private hospital insurance causes a sizable and signicant increase in the likelihood of hospital admission as a private patient. However, there is little evidence of moral hazard; the treatment eect of private hospital insurance on private patient care is driven almost entirely by the substitution away from public patient care towards private patient care. |
| Keywords: | Health Insurance, Health Care Consumption, Moral Hazard |
| JEL: | I11 I18 C35 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trb:wpaper:2013.03&r=ias |
| By: | Tack, Jesse B.; Ubilava, David |
| Keywords: | Agricultural Finance, Crop Production/Industries, |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:151429&r=ias |
| By: | Feng, Hongli; Du, Xiaodong; Hennessy, David A. |
| Abstract: | The U.S. crop insurance has two distinct features that set itself apart from insurance in other areas: (i) it is explicitly subsidized with an average premium subsidy rate of about 60 percent in recent years; and (ii) the law requires the premium rate be set at actuarially fair level with the federal government paying the administrative and operational costs related to the sale and service of insurance policies. Bearing in mind these features, we examine to what extent farmers’ crop insurance choices conform to economic theory and estimate the implications of changes in premium subsidy structure. A standard expected utility maximization framework is set up to analyze the trade-offs between higher risk protection and larger subsidy payment. We show that, given actuarially fair premium, a rational farmer will choose the coverage level with the highest premium subsidy or a higher coverage level. With a large insurance unit level data, we fail to find empirical support for this theoretical results, which suggest a possible “anomaly” in insurance decisions. Estimation through mixed logit models reveals that out-of-pocket premium has a negative impact on the probability of an insurance product being chosen. |
| Keywords: | actuarial fairness, agricultural policy, coverage level, federal crop insurance, premium subsidy, Crop Production/Industries, Farm Management, Q15, Q18, Q24, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:151284&r=ias |
| By: | Ozaki, Vitor Augusto; Adami, Andreia Cristina de Oliveira |
| Abstract: | Since 2003 crop insurance programs became the focus of agricultural policy in Brazil. Given the increasing interest in insurance, accurate calculation of premium values is of great importance. We address the issue of the revenue distribution at the farm-level and its implication to the Brazilian crop insurance contract. We estimate the probability of loss by using the Skew-normal distribution of revenue in the West of Parana (South of Brazil). Results show that insurers (empirical) rates tend to underestimate the risk in the lower coverage levels (50% and 60%). At the level of 70% of coverage the Empirical Rate and the Skew-Normal Rate are similar on average. |
| Keywords: | revenue insurance, premium rate, skew-normal distribution, agricultural policy, Agricultural and Food Policy, Risk and Uncertainty, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:151289&r=ias |
| By: | Giles, John; Wang, Dewen; Park, Albert |
| Abstract: | This paper first reviews the history of social insurance policy and coverage in urban China, documenting the evolution in the coverage of pensions and medical and unemployment insurance for both local residents and migrants, and highlighting obstacles to expanding coverage. The paper then uses two waves of the China Urban Labor Survey, conducted in 2005 and 2010, to examine the correlates of social insurance participation before and after implementation of the 2008 Labor Contract Law. A higher labor tax wedge is associated with a lower probability that local employed residents participate in social insurance programs, but is not associated with participation of wage-earning migrants, who are more likely to be dissuaded by fragmentation of the social insurance system. The existing gender gap in social insurance coverage is explained by differences in coverage across industrial sectors and firm ownership classes in which men and women work. |
| Keywords: | Health Economics&Finance,Insurance&Risk Mitigation,Social Protections&Assistance,Pensions&Retirement Systems,Wages, Compensation&Benefits |
| Date: | 2013–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6497&r=ias |
| By: | Janzen, Sarah A.; Carter, Michael R. |
| Abstract: | When natural disasters strike in developing countries, households are often forced to choose between preserving assets or consumption: either can result in permanent consequences. In this paper we ask: can insurance transfer risk in a way that reduces the need for households to rely on costly coping strategies that undermine their future productivity? Since 2010, pastoralists in northern Kenya have had access to a novel index-based drought insurance product. We analyze the impact of a drought-induced insurance payout on consumption smoothing and asset protection in this setting. Our results show that insured households are on average 36 percentage points less likely to anticipate drawing down assets, and 25 percentage points less likely to anticipate reducing meals upon receipt of a payout. Empirical evidence of a poverty trap in this setting suggests that these average impacts may mask a heterogeneous behavioral response and subsequent heterogeneous impacts of insurance. For this reason we use Hansen's (2000) threshold estimator to estimate a critical asset threshold around which optimal coping strategies bifurcate. Using this approach we nd that that households holding assets above a critical asset threshold, who are also most likely to sell assets, are 64 percentage points less likely to anticipate doing so when an insurance payout is available. Households holding assets below the estimated threshold, who are likely to destabilize consumption, are 43 percentage points less likely to anticipate doing so with insurance. Together, these results suggest that insurance can help households to protect assets during crises, without having the deleterious eect on human capital investments. |
| Keywords: | Agribusiness, Risk and Uncertainty, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:151141&r=ias |
| By: | Tan Wang (Sauder School of Business, Finance Division, University of British Columbia, Canada); Tony S. Wirjanto (School of Accounting & Finance and Department of Statistics & Actuarial Science, University of Waterloo, Canada) |
| Abstract: | Building on the tools developed for American call options in financial markets and the optimal timing of investment under uncertainty in economics, this paper proposes a stylized equilibrium model to study the optimal time for a risk-averse unemployed individual, who receives an unemployment insurance benefit and may receive a recall from the old job, to exit from a waiting (and hence unemployment) state and start a new job. It is shown that as a result of the individual’s exercising the optimal timing strategy, there is a duration of “waiting” and that this duration is affected by a number of economic factors, prominent among which are uncertainty on the part of the unemployed individual and the attitude of this individual toward risk. |
| Keywords: | Unemployment insurance, income, utility function, Brownian motions, search, waiting, exit, continuation region |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:31_13&r=ias |
| By: | Tatyana Koreshkova (Concordia University); Karen Kopecky (Federal Reserve Bank of Atlanta) |
| Abstract: | We evaluate the joint effects of social security and Medicaid on labor supply, savings, economic inequality, and welfare in an environment with idiosyncratic risk in labor earnings, health expenses, and survival. The model features households consisting males and females; a progressive social security system which provides insurance against lifetime earnings, health expense, survival and spousal death risks; and a means-tested social insurance system that proxies for the US Medicaid program. We show that the annuity role of social security benefits entails important welfare gains in the presence of health expense risk and Medicaid. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:967&r=ias |
| By: | Fiordelisi, Franco; Meles, Antonio; Monferrà, Stefano; Starita, Maria Grazia |
| Abstract: | This study analyses the determining factors of reserve errors in publicly listed property and casualty insurance companies in the U.S. This subject deserves special attention because the previous literature does not control for trade-offs between executive remuneration and other incentives regarding such insurers’ discretionary accounting choices. We find that insurance managers manipulate loss reserves to increase their stock-based remuneration and to achieve corporate goals particularly those goals that relate to reducing tax burdens and obscuring financial weakness. We also observe that enactment of the Sarbanes-Oxley Act has constrained the loss reserve underestimation and changed the structure of reserve error incentives. |
| Keywords: | P&C insurers; reserve manipulation; executive compensation |
| JEL: | G22 G32 M42 |
| Date: | 2013–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47867&r=ias |
| By: | Emma Tominey |
| Abstract: | Female labor supply can insure households against shocks to paternal employment. The paper estimates whether the female labor supply response to a paternal employment shock differs by eligibility to maternity employment protection. We exploit time-state variation in the implementation of unpaid maternity leave through the Family and Medical Leave Act (FMLA) in the US which increased employment protection from 0 to 12 weeks. We find that mothers eligible for FMLA speed up their return to work in response to a paternal shock, with a conditional probability of being in work 53% higher than in households with no paternal shock. In contrast, there was a negligible insurance response for mothers with no employment protection. |
| Keywords: | Female labor Supply; Insurance; Maternity Leave |
| JEL: | I30 J13 J20 J64 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:13/11&r=ias |
| By: | Jason Abaluck; Jonathan Gruber |
| Abstract: | We explore choice inconsistency over time within the Medicare Part D Prescription Drug Program. Using the full universe of Part D claims data, we revisit our earlier work on partial data to replicate our results showing large “foregone savings” among Part D enrollees. We also document that this foregone savings increases over time during the first four years of the Part D program. We then develop a rich dynamic structural framework that allows us to mathematically decompose the “foregone welfare” from inconsistent plan choices into components due to demand side factors, supply side factors, and changes in preferences over time. We find that the welfare cost of choice inconsistencies increases over time. Most importantly, we find that there is little improvement in the ability of consumers to choose plans over time; we identify and estimate little learning at either the individual or cohort level over the years of our analysis. Inertia does reduce welfare, but even in a world with no inertia we estimate that substantial welfare losses would remain. We conclude that the increased choice inconsistencies over time are driven by changes on the supply side that are not offset both because of inertia and because non-inertial consumers still make inconsistent choices. |
| JEL: | I11 I18 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19163&r=ias |
| By: | Chen, Xuan; Goodwin, Barry K. |
| Abstract: | In the US forestry industry, wildre has always been one of the leading causes of damage. This topic is of growing interest as wildre has caused huge losses in recent years. Among all causes, lightning has always been the leading hazard. Unlike human related wildres for which timber owners may be able to trace the responsible persons to claim losses, forestland owners essentially have no means to recover their losses against lightning{induced wildre. In light of the fact that there are very few risk management instruments available to compensate timber losses. Following this line of inquiry, our paper studies risks of lightning induced wildre, conditioning on crucial informational variables, across both spatial units and time periods. A non{parametric bootstrapping method is used to quantify the risks. Some relevant observable variables, such as environment and climate factors, are found to be statistically signicant factors related to wildre risks. A group index insurance scheme has been proposed and its associated actuarially fair premium rates have been estimated. Implications for wildre management policies are also discussed. |
| Keywords: | lightning re, index insurance, spatio-temporal correlation, Land Economics/Use, Risk and Uncertainty, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:151285&r=ias |
| By: | Brecht, Henrike; Deichmann, Uwe; Wang, Hyoung Gun |
| Abstract: | Which cities have the highest risk of human and economic losses due to natural hazards? And how will urban exposure to major hazards change over the coming decades? This paper develops a global urban disaster risk index that evaluates the mortality and economic risks from disasters in 1,943 cities in developing countries. Concentrations of population, infrastructure, and economic activities in cities contribute to increased exposure and susceptibility to natural hazards. The three components of this risk measure are urban hazard characteristics, exposure, and vulnerability. For earthquakes, cyclones, floods, and landslides, single hazard risk indices are developed. In addition, a multi-hazard index gives a holistic picture of current city risk. Demographic-economic projection of city population growth to 2050 suggests that exposure to earthquake and cyclone risk in developing country cities will more than double from today's levels. Global urban risk analysis, as presented in this paper, can inform the prioritization of resources for disaster risk management and urban planning and promote the shift toward managing risks rather than emergencies. |
| Keywords: | Population Policies,Hazard Risk Management,Food&Beverage Industry,Natural Disasters,Insurance&Risk Mitigation |
| Date: | 2013–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6506&r=ias |