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on Insurance Economics |
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Issue of 2014‒03‒30
fourteen papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Nguyen Viet Cuong |
| Abstract: | Although there are numerous studies on impact evaluation of overall health insurance, little is known on the impact of health insurance on health care utilization and out-of-pocket health care spending of children, especially in developing countries. This paper measures the impact of child health insurance on health care utilization and spending of children from 6 to 14 years old in Vietnam using two recent nationally representative surveys. Unlike previous empirical studies which found a positive effect of health insurance on health care utilization in Vietnam, we did not find a statistically significant effect of school health insurance as well as free health insurance for children on outpatient health care contacts. However, the school health insurance and free health insurance help the insured children decrease out-of-pocket spending per outpatient contact by around 14 and 26 percent, respectively. |
| Keywords: | Child health insurance, impact evaluation, health care utilization, out-of-pocket spending, Vietnam. |
| JEL: | I10 G22 H43 |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-180&r=ias |
| By: | Sun, Stephen Teng; Yannelis, Constantine |
| Abstract: | In some insurance markets, the uninsured can generate a negative externality on the insured, leading insurance companies to pass on costs as higher premia. Using a novel panel data set and a staggered policy change that exogenously varied the rate of uninsured drivers at the county level in California, we quantitatively investigate the effect of uninsured motorists on automobile insurance premia. Consistent with predictions of theory, we find uninsured drivers lead to higher insurance premia. Specifically, a 1 percentage point increase in the rate of uninsured drivers raises insurance premia by between 1-2%. We also discuss corrective Pigouvian taxes. |
| Keywords: | Insurance, externality, uninsured, Pigouvian tax |
| JEL: | G22 H21 H23 R40 |
| Date: | 2013–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:54638&r=ias |
| By: | Ilaria Dalla Pozza; Lionel Texier |
| Abstract: | The introduction of digital channels in the insurance industry, that has always been strongly |
| Keywords: | assurance, multicanal, agences, digital |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-190&r=ias |
| By: | Loïc Berger |
| Abstract: | This paper derives simple and plausible conditions under which ambiguityaversion raises the demand for (self-) insurance and self-protection when theeffort is furnished one period before the realization of the uncertainty. Unlikethe recent contribution made by [Alary D. Gollier C. Treich N. 2013. Theeffect of ambiguity aversion on insurance and self-protection. The EconomicJournal], I show that in the most usual situations in which the level of ambiguitydoes not increase with the level of effort, a clear and positive answer canbe given to the question: Does ambiguity aversion raise the level of effort? |
| Keywords: | non-expected utility; self protection; self insurance; ambiguity; prudence |
| JEL: | D61 D81 D91 G11 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/156152&r=ias |
| By: | Baptiste Françon (Centre d'Economie de la Sorbonne) |
| Abstract: | This paper proposes an empirical analysis of the declining support for the German Social Democratic Party (SPD) during Schröder government's second term of office, which was marked by major reforms in the fields of unemployment insurance and labour market policy (Hartz reforms). Drawing on a panel of West Germans, we provide evidence that this disaffection was strongly related to a worker's occupation and that it involved electoral backlash from core blue-collar constituencies of the SPD. In comparison, the impact of other socio-economic characteristics such as the labour market status or the income was less pronounced. We further show that discontent grew stronger among occupations where the risk of unemployment was more prevalent. This suggests that opposition to specific measures that weakened status-securing principles of the unemployment insurance substantially drove electoral disaffection with the SPD during this period. |
| Keywords: | Political economy, economics of voting, social policy preferences, unemployment insurance, social-democracy, Germany. |
| JEL: | D01 D12 E26 C81 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:14019&r=ias |
| By: | Grimm, Michael (University of Passau); Treibich, Carole (Paris School of Economics) |
| Abstract: | We focus on helmet use behavior among motorbike users in Delhi. We use a detailed data set collected for the purpose of the study. To guide our empirical analysis, we rely on a simple model in which drivers decide on self-protection and self-insurance. The empirical findings suggest that risk averse drivers are more likely to wear a helmet, there is no systematic effect on speed. Helmet use also increases with education. Drivers who show a higher awareness of road risks are both more likely to wear a helmet and to speed less. Controlling for risk awareness, we observe that drivers tend to compensate between speed and helmet use. The results can provide a basis for awareness-raising policies. Improvements to the road infrastructure bear the risk of leading to risk-compensating behavior. |
| Keywords: | road safety, helmet use, risky health behavior, self-protection, self-insurance, India, risk-taking behavior |
| JEL: | D10 I10 I15 K42 R41 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8042&r=ias |
| By: | Arndt R. Reicher; Magdalena Stroka |
| Abstract: | There is widespread concern about the quality of care in nursing homes. Based on administrative data of a large health insurance fund, we investigate whether nursing home prices affect relevant quality of care indicators at the resident level. Our results indicate a significantly negative price effect on inappropriate and psychotropic medication. In contrast, we find no evidence for fewer painful physical sufferings for residents of nursing homes with higher prices. |
| Keywords: | Quality of care; nursing homes; inappropriate medication; psychotropic drugs; panel data analysis |
| JEL: | I10 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0470&r=ias |
| By: | Jacob Glazer; Thomas G. McGuire; Julie Shi |
| Abstract: | This paper develops and implements a statistical methodology to account for the equilibrium effects (aka adverse selection) in design of risk adjustment formula in health insurance markets. Our setting is modeled on the situation in Medicare and the new state Exchanges where individuals sort themselves between a discrete set of plan types (here, two). Our “Silver” and “Gold” plans have fixed characteristics, as in the well-known research on selection and efficiency by Einav and Finkelstein (EF). We build on the EF model in several respects, including by showing that risk adjustment can be used to achieve the premiums that will lead to efficient sorting. The target risk adjustment weights can be found by use of constrained regressions, where the constraints in the estimation are conditions on premiums that should be satisfied in equilibrium. We illustrate implementation of the method with data from seven years of the Medical Expenditure Panel Survey. |
| JEL: | I13 I18 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19998&r=ias |
| By: | Castiglionesi, Fabio; Feriozzi, Fabio; Lóránth, Gyöngyi; Loriana Pelizzon |
| Abstract: | Banks can deal with their liquidity risk by holding liquid assets (self-insurance), by participating in interbank markets (coinsurance), or by using flexible financing instruments, such as bank capital (risk-sharing). We use a simple model to show that undiversi fiable liquidity risk, i.e. the liquidity risk that banks are unable to coinsure on interbank markets, represents an important risk factor affecting their capital structures. Banks facing higher undiversi fiable liquidity risk hold more capital. We posit that empirically banks that are more exposed to undiversifi able liquidity risk are less active on interbank markets. Therefore, we test for the existence of a negative relationship between bank capital and interbank market activity and find support in a large sample of U.S. commercial banks. -- |
| Keywords: | Bank Capital,Interbank Markets,Liquidity Coinsurance |
| JEL: | G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:45&r=ias |
| By: | Jan Baldeaux; Man Chung Fung (Australian School of Business, University of New South Wales); Katja Ignatieva (Australian School of Business, University of New South Wales); Eckhard Platen (Finance Discipline Group, UTS Business School, University of Technology, Sydney) |
| Abstract: | Long dated xed income securities play an important role in asset-liability management, in life insurance and in annuity businesses. This paper applies the benchmark approach, where the growth optimal portfolio (GOP) is employed as numeraire together with the real world probability measure for pricing and hedging of long dated bonds. It employs a time dependent constant elasticity of variance model for the discounted GOP and takes stochastic interest rate risk into account. This results in a hybrid framework that models the stochastic dynamics of the GOP and the short rate simultaneously. We estimate and compare a variety of continuous-time models for short-term interest rates using non-parametric kernel-based estimation. The hybrid models remain highly tractable and t reasonably well the observed dynamics of proxies of the GOP and interest rates. Our results involve closed-form expressions for bond prices and hedge ratios. Across all models under consideration we nd that the hybrid model with the 3/2 dynamics for the interest rate provides the best t to the data with respect to lowest prices and least expensive hedges. |
| Keywords: | Long dated bond pricing; stochastic interest rate; growth optimal portfolio; nonparametric kernel |
| Date: | 2014–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:343&r=ias |
| By: | Daniel Harenberg; Alexander Ludwig |
| Abstract: | We ask whether a PAYG-financed social security system is welfare improving in an economy with idiosyncratic and aggregate risk. We argue that interactions between the two risks are important for this question. One is a direct interaction in the form of a countercyclical variance of idiosyncratic income risk. The other indirectly emerges over a household's life-cycle because retirement savings contain the history of idiosyncratic and aggregate shocks. We show that this leads to risk interactions, even when risks are statistically independent. In our quantitative analysis, we find that introducing social security with a contribution rate of two percent leads to welfare gains of $2.2 \%$ of lifetime consumption in expectation, despite substantial crowding out of capital. This welfare gain stands in contrast to the welfare losses documented in the previous literature, which studies one risk in isolation. We show that jointly modeling both risks is crucial: 60% of the welfare benefits from insurance result from the interactions of risks. |
| Keywords: | social security, idiosyncratic risk, aggregate risk, welfare |
| URL: | http://d.repec.org/n?u=RePEc:stz:wpaper:eth-rc-14-002&r=ias |
| By: | Julie Klebonis; Michelle Herman Soper; Jim Verdier |
| Keywords: | Medicare, State Programs, Medicaid Enrollees, Health |
| JEL: | I |
| Date: | 2014–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:8072&r=ias |
| By: | Mark Duggan; Amanda Starc; Boris Vabson |
| Abstract: | Governments contract with private firms to provide a wide range of services. While a large body of previous work has estimated the effects of that contracting, surprisingly little has investigated how those effects vary with the generosity of the contract. In this paper we examine this issue in the Medicare Advantage (MA) program, through which the federal government contracts with private insurers to coordinate and finance health care for more than 15 million Medicare recipients. To do this, we exploit a substantial policy-induced increase in MA reimbursement in metropolitan areas with a population of 250 thousand or more relative to MSAs just below this threshold. Our results demonstrate that the additional reimbursement leads more private firms to enter this market and to an increase in the share of Medicare recipients enrolled in MA plans. Our findings also reveal that only about one-fifth of the additional reimbursement is passed through to consumers in the form of better coverage. A somewhat larger share accrues to private insurers in the form of higher profits and we find suggestive evidence of a large impact on advertising expenditures. Our results have implications for a key feature of the Affordable Care Act that will reduce reimbursement to MA plans by $156 billion from 2013 to 2022. |
| JEL: | H22 I13 L1 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19989&r=ias |
| By: | Selim Mankaï; Aymen Belgacem |
| Abstract: | Theory and empirical evidence recognize interactions between capital and risk. This paper analyzes the effect of reinsurance, as a new endogenous decision variable, on this policy mix using simultaneous equations model. Empirical results obtained from a sample of U.S. property-liability insurance firms reveal significant interactions between capital, risk, and reinsurance. The relationship between risk and capital is positive, highlighting the effectiveness of regulatory mechanisms. Reinsurance is negatively associated with capital, for which it appears to act as a substitute. These results are strongly sensitive to the level of capital held in excess of the regulatory minimum requirements. Weakly capitalized firms adjust their reinsurance and risk levels more extensively and try to rebuild an appropriate capital buffer. Unlike other decision variables, the capital ratio converges toward a target level. |
| Keywords: | Risk-taking, Capital Regulation, Reinsurance, Simultaneous Equations, Instrumental Variables. |
| JEL: | G22 G28 G32 |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-154&r=ias |