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on Insurance Economics |
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Issue of 2014‒02‒02
twelve papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Swenja Surminski; Jillian Eldridge |
| Abstract: | Flooding is the largest natural disaster risk in England and it is expected to rise even further as we experience a changing climate and continue putting more people and property in harm’s way. Managing this growing flood risk requires a broad portfolio of measures to reduce the probability of flooding, keep impact and damages to a minimum and provide financial support for the residual risk. Agreeing on how we pay for this now and in the future is a challenge, with competing drivers such as fairness, economic efficiency, political feasibility and public acceptance all playing their part. One example for this is the recent debate about the future of flood insurance. After more than two years of negotiations between government and the private insurance industry, details of a new scheme (Flood Re) have now been published, with the aim for implementation in summer 2015. While rising flood losses and increasing costs of insurance are the two main reasons for reforming the existing insurance arrangements, one important aspect has been widely neglected: how the existing arrangement and new flood insurance proposal reflect on the need to manage rising flood risks. We investigate this in the context of the assumption that insurance can support and trigger risk reduction behaviour if correctly designed and implemented. We ask if and how the existing and the proposed scheme contain incentives for risk reduction or whether they will increase moral hazard. By applying our analytical framework we find an absence of formal incentive mechanisms in the existing, and in the newly proposed Flood Re scheme. We highlight some of the barriers for applying insurance to risk reduction and point to some possible modifications in the Flood Re proposal to deliver a greater link between risk transfer and risk reduction. Our investigation offers some insights into the challenges of designing and implementing flood insurance schemes – a task that is currently being considered in a range of countries, including several developing countries, who hope to apply flood insurance as a tool to increase their climate resilience. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp144&r=ias |
| By: | Ilaria Dalla Pozza; Lionel Texier |
| Abstract: | The goal of this paper is to investigate the implementation of multichannel strategies in the service sector and to understand objectives, difficulties faced by companies, synergies and competitive effects among channels, and future areas of investment. We answer our research questions using in depth interviews with a sample of insurance directors responsible for the multichannel strategy of the major French insurance players. |
| Keywords: | Global financial crisis, contagion, emerging equity markets, sovereign risk. |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-18&r=ias |
| By: | Fels, Markus |
| Abstract: | We analyze how customers with limited attention value and choose among health plans. We show how the model can accommodate three observations regarding plan choice. First, people tend to overweight the premium and thus underappreciate the value of health insurance. Second, insurance companies may have a strong incentive to reduce quality and to hide these shortcomings in the fine print while attracting customers with insufficiently lower premiums. Finally, the willingness-to-pay for insurance is subadditive creating an incentive for providers to unbundle comprehensive plans. We discuss how these three effects may result in a fundamental dilemma for policy makers. -- |
| JEL: | D18 D89 I11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80485&r=ias |
| By: | Shinya Sugawara (Faculty of Economics, The University of Tokyo); Jiro Nakamura (Advanced Research Institute for the Sciences and Humanities, Nihon University) |
| Abstract: | 　　 This study analyzes incentives and supplier-induced demand of care man- agers, middlemen between consumers and service providers in the Japanese social insurance program for long-term care. Care managers can be consid- ered as pure gatekeepers in that their function is limited to referral to spe- cialists and they themselves do not provide care. Rewards for care managers are rendered by capitation, which is considered as a cost-effective payment mechanism for insurers. However, many care managers actually work for rms that also operate service provision sectors. The service providers are rewarded by the fee-for-service payment and have motivation to induce ex- cess consumer demand. Thus, the violation of neutrality of care managers might yield an nancial burden on social insurance. In this study, we em- pirically analyze the behavior of care managers by checking whether they cause supplier-induced demand. Our estimation results detect the existence of care manager-induced demand for care managers who work for rms that jointly operate in service provision sectors; however, those who operate only care management do not induce demand. Based on the estimation results, we conduct a quantitative analysis and show that the care manager-induced produces a considerable nancial burden on social insurance. Keyword: Elderly care; Gatekeepers; Incentive; Supplier-induced demand; Japanese Long-Term Care Insurance program; Care managers |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2014cf916&r=ias |
| By: | Catherine Bruneau; Nadia Sghaier |
| Abstract: | This paper reinvestigates the presence and the causes of the underwriting cycle in the French property-liability insurance industry as displayed by the combined ratio for the 1963-2008 period. The question is still a timely issue if we refer to regulation issues and the recent proposals in the Sovency framework to take into account the fluctuations of the profitability in specifying the solvency capital requirement. In the literature, two approaches are traditionally adopted to investigate the underwriting cycle : the first one refers to an endogeneous characterization of the cyclical properties from an AR(2) model. The second one claims that the cycle in the property-liability insurance has exogeneous sources related to the financial markets and the general economy. In this article, we reconcile the two approaches by using a smooth transition regression (STR) model. This model shows that the AR(2) model is relevant in a first regime where the capacity constraint is binding. In contrast, the fluctuations in the combined ratio are positively influenced by the lagged stock market return in a second regime where the capacity is not constrained, as for the most recent period. Moreover, we find that the current capacity is related to the lagged inflation rate in the latter case. These results confirm the idea that the European rules regarding the solvency capital requirement for insurance companies should take into account the state of the economy and the financial markets. |
| Keywords: | underwriting cycle, property-liability insurance, combined ratio, AR(2) model,financial markets, general economy, STR model, capacity constraint, solvency. |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-06&r=ias |
| By: | M. Bernardi; L. Petrella |
| Abstract: | In this paper we consider a multivariate model-based approach to measure the dynamic evolution of tail risk interdependence among US banks, financial services and insurance sectors. To deeply investigate the risk contribution of insurers we consider separately life and non-life companies. To achieve this goal we apply the multivariate student-t Markov Switching model and the Multiple-CoVaR (CoES) risk measures introduced in Bernardi et. al. (2013b) to account for both the known stylised characteristics of the data and the contemporaneous joint distress events affecting financial sectors. Our empirical investigation finds that banks appear to be the major source of risk for all the remaining sectors, followed by the financial services and the insurance sectors, showing that insurance sector significantly contributes as well to the overall risk. Moreover, we find that the role of each sector in contributing to other sectors distress evolves over time accordingly to the current predominant financial condition, implying different interconnection strength. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1401.6408&r=ias |
| By: | Alain Chateauneuf (IPAG Business School et Centre d'Economie de la Sorbonne - Paris School of Economics); Mina Mostoufi (Centre d'Economie de la Sorbonne - Paris School of Economics); David Vyncke (Ghent University) |
| Abstract: | Considering that a natural way of sharing risks in insurance companies is to require risk by risk Pareto optimality, we offer in case of strong risk aversion, a simple computable method for deriving all Pareto optima. More importantly all Individually Rational Pareto optima can be computed according to our method. |
| Keywords: | Multivariate risk sharing, comonotonicity, individually rational Pareto optima. |
| JEL: | D81 D70 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:14003&r=ias |
| By: | Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Based on local variations in vocational rehabilitation (VR) priorities, we examine the impacts of alternative VR programs on short- and long-term labor market outcomes for temporary disability insurance (TDI) claimants in Norway. The analysis builds on rich and detailed administrative registers covering 345,000 claimants. We find that a strategy focusing on rapid placement in the regular labor market is superior to alternative strategies giving higher priority to vocational training or sheltered employment. Strategies prioritizing subsidized regular education also tend to be relatively successful in terms of final outcomes, but at the cost of protracted periods of benefit dependency first. |
| Keywords: | treatment effects, social insurance, vocational rehabilitation, program evaluation |
| JEL: | C21 C26 H55 I38 J24 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7892&r=ias |
| By: | Wagner, Lilo; Baumann, Julian |
| Abstract: | We rationalize a special type of sharing information which can typically be found in markets for occupational disability insurances. There, firms share information about acceptances and rejections of an applicant. We set up a multiple-step signalling model with uninformed agents and endogenize competing principals' decisions to acquire information on risk types. We formalize the idea that information exchange also serves as a tool to signal an applicant's switching type. This may lessen competition and increase industry profits or result in a higher share of uninsured applicants as compared to a market without information sharing. In any case, consumer welfare is reduced. Our model also helps to understand why access to the system is not made dependent on the provision of own data. In addition, we rationalize the existence of anonymous prequalification tests that allow consumers to gain information about their risk type without risking to enter a system entry. -- |
| JEL: | D82 D83 G22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80015&r=ias |
| By: | Igor Sheiman (National Research University Higher School of Economics); Vladimir Shevski (National Research University Higher School of Economics) |
| Abstract: | Fragmentation in organization and discontinuities in the provision of medical care are problems in all healthcare systems, whether it is the mixed public-private system in the USA, national health services in the UK, or insurance-based ones in Western Europe and Russia. In all of these countries, a major challenge is to improve integration in order to improve efficiency and health outcomes. This article assesses issues related to fragmentation and integration in conceptual terms and argues that key attributes of integration are teamwork, coordination, and continuity of care. It then presents a summary of integration problems in Russia and presents the results of a large survey of physicians concerning the attributes of integration. It is argued that the characteristics of the national service delivery model do not ensure integration. The Semashko model of service delivery, although designed as an integrated model, has been distorted under pressure of the process of specialization of care. It is also argued that larger organizational forms of service provision, like policlinics and integrated hospital-policlinics, do not have higher scores of integration indicators than smaller ones. Proposals to improve integration in Russia are presented with the focus on the regular evaluation of integration and fragmentation, regulation of integration activities, enhancing the role of PHC providers, and economic incentives |
| Keywords: | health policy, medical service integration, coordination of care, continuity of care, primary health care |
| JEL: | Z19 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:10/pa/2013&r=ias |
| By: | Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Pierre-Emmanuel Thérond (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429) |
| Abstract: | The recent fi nancial crisis has lead the IASB to settle new reporting standards for fi nancial instruments. The extended ability to measure some debt instruments at amortized cost is associated with a new impairment losses mechanism: Expected Credit Losses. In this paper, after a brief description of the principles elaborated by IASB for IFRS 9, we propose a methodology using CDS market prices in order to monitor signi cant changes in creditworthiness of fi nancial instruments and subsequent credit losses impairment. This methodology is implemented in detail to a real world dataset. Numerical tests are drawn to assess the eff ectiveness of the procedure. |
| Keywords: | Credit Risk; Default; Detection; Monitoring; Impairment; Accounting; IFRS; Insurance; CDS |
| Date: | 2014–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00927391&r=ias |
| By: | Gobien, Simone; Vollan, Björn |
| Abstract: | Mutual aid among villagers in developing countries often is the sole possibility to insure against economic shocks. By using field laboratory experiments in Cambodian villages we study social cohesion in newly resettled and established communities which are both part of a land distribution project. All participants signed up voluntarily for the project, share comparable socio-demographic attributes and have similar preexisting network ties. We use a version of the solidarity game to identify the effect of a voluntary resettlement program on the willingness to help fellow villagers after an income shock. The voluntary resettled players only transfer between 41 % and 57 % of the amount the non-resettled players transfer to an anonymous community member. The solidarity differences are not only driven by lower expectations that the others would also help but are based on more selfish preferences among resettled farmers. Our findings are relevant for resettlement policies, because recipients might have to get additional compensation and formal insurance against the negative social consequences of resettlement until social cohesion is eventually re-established. -- |
| JEL: | C93 O15 O22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79985&r=ias |