nep-ias New Economics Papers
on Insurance Economics
Issue of 2014‒11‒22
four papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Survival Analysis of very Low Birth Weight Infant Mortality in Taiwan By Chialin Chang; Wei-Chen Chen; Michael McAleer
  2. Multiple Contracting in Insurance Markets: Cross-Subsidies and Quantity Discounts By Attar, Andrea; Mariotti, Thomas; Salanié, François
  3. Consumer search behavior and willingness to pay for insurance under price dispersion By Malakhov, Sergey
  4. Expected Utility and Catastrophic Risk By Masako Ikefuji; Roger Laeven; Jan Magnus; Chris Muris

  1. By: Chialin Chang (National Chung Hsing University, Taiwan); Wei-Chen Chen (National Chung Hsing University, Taiwan); Michael McAleer (National Tsing Hua University, China; Erasmus University Rotterdam, the Netherlands; Complutense University of Madrid, Spain)
    Abstract: This paper examines the determinants of very low birth weight infant (or neonatal) mortality using the Taiwan National Health Insurance Research database from 1997 to 2009. After infants are discharged from hospital, it is not possible to track their mortality, so the Cox proportional hazard model is used to analyze the very low birth weight infant mortality rate. In order to clarify treatment responsibility and to avoid selective referral effects, we use the number of infants treated in the preceding five years to observe the effect of a physician’s and hospital’s medical experience on the mortality rate of hospitalized minimal birth weight infants. The empirical results show that, given disease control variables, a higher infant weight, higher quality hospitals, increased hospital medical experience, and higher investment in pediatrics can reduce the mortality rate significantly. However, an increased physician’s medical experience does not seem to influence significantly the very low birth weight infant mortality rate.
    Keywords: Very low birth weight, Neonatal mortality, Physician’s infant experience, Hospital infant experience, Statistical analysis, Cox proportional hazard model, Selective referral, Taiwan National Health Insurance Scheme
    JEL: C41 I10 I13 I18
    Date: 2014–06–10
  2. By: Attar, Andrea; Mariotti, Thomas; Salanié, François
    Abstract: We study a nonexclusive insurance market with adverse selection in which insurers compete through simple contract offers. Multiple contracting endogenously emerges in equilibrium. Different layers of coverage are priced fairly according to the types of insurees who purchase them, giving rise to cross-subsidies between types. Riskier insurees demand greater total coverage at an increasing unit price, but the contracts offered by insurers feature quantity discounts in equilibrium. Our policy implications emphasize the need to regulate the supply side of nonexclusive insurance markets, leaving insurees free to choose their optimal level of coverage.
    Keywords: Insurance Markets, Multiple Contracting, Adverse Selection.
    JEL: D43 D82 D86
    Date: 2014–10–07
  3. By: Malakhov, Sergey
    Abstract: When the increase in income reduces the time of search and increases prices of purchases, the increase in price can be presented as the increase in the willingness to pay for insurance. The optimal consumer decision represents the trade-off between the propensity to search for proficient insurance and marginal savings on insurance policy. Under price dispersion the indirect utility function takes the form of cubic parabola, where the saddle point represents the comprehensive insurance. The comparative static analysis of the saddle point of the utility function discovers the ambiguity of the departure from risk-neutrality. This ambiguity can produce the ordinary risk seeking behavior as well as mathematical catastrophes of Veblen-effect’s imprudence and over prudence of family altruism. The comeback to risk aversion is also ambiguous and it results either in increasing or in decreasing relative risk aversion. The paper argues that the decreasing risk aversion results in the optimum quantity of money.
    Keywords: consumer search, risk, insurance, real balances, Veblen effect, family altruism, mathematical catastrophe
    JEL: D11 D81
    Date: 2014–10–28
  4. By: Masako Ikefuji (University of Southern Denmark, Denmark); Roger Laeven (University of Amsterdam, the Netherlands); Jan Magnus (VU University Amsterdam, the Netherlands); Chris Muris (Simon Fraser University, Canada)
    Abstract: An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also under heavy-tailed distributional assumptions. Our results are context-free and are relevant to many fields encountering catastrophic risk analysis, such as, perhaps most noticeably, insurance and risk management.
    Keywords: Expected utility, Catastrophe, Cost-benefit analysis, Risk management, Power utility, Exponential utility, Heavy tails
    JEL: D61 D81 G10 G20
    Date: 2014–10–14

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