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on Insurance Economics |
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Issue of 2014‒12‒08
seven papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Eichhorst, Werner (IZA); Wozny, Florian (IZA) |
| Abstract: | More and more policy makers tend to declare that the loss of exchange rate adjustments within the European Economic and Monetary Union (EMU) has to be compensated by an increase in fiscal policy. A joint unemployment insurance is seen as one opportunity. After comparing a basic design with a "kicking-in" style unemployment insurance, we recommend the latter as it captures the main motivation of such a transnational transfer mechanism, combating credit market constraints. |
| Keywords: | European Economic and Monetary Union, European unemployment insurance, automatic stabilizers |
| JEL: | J65 J68 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izapps:pp92&r=ias |
| By: | Dong, Ming |
| Abstract: | This article explores life insurance consumption in 31 European countries from 2003 to 2012 and aims to investigate the extent to which market transparency can affect life insurance demand. The cross-country evidence for the entire sample period shows that greater market transparency, which resolves asymmetric information, can generate a higher demand for life insurance. However, when considering the financial crisis period (2008-2012) separately, the results suggest a negative impact of enhanced market transparency on life insurance consumption. The mixed findings imply a trade-off between the reduction in adverse selection under greater market transparency and the possible negative effects on life insurance consumption during the crisis period due to more effective market discipline. Furthermore, this article studies the extent to which transparency can influence the reaction of life insurance demand to bad market outcomes: i.e., low solvency ratios or low profitability. The results indicate that the markets with bad outcomes generate higher life insurance demand under greater transparency compared to the markets that also experience bad outcomes but are less transparent. |
| Keywords: | life insurance demand,transparency,market discipline |
| JEL: | G14 G22 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:1714&r=ias |
| By: | Ricci L. Reber; Sarah J. Pack (Bureau of Economic Analysis) |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:bea:wpaper:0115&r=ias |
| By: | Villeneuve, Bertrand |
| Abstract: | I examine competition in the sector of mortgage life insurance, in particular the periodic switching right (PSR), by which the borrower can change his insurer once every period (say, every year). The PSR is likely to have pro competitive effects (lower premium), but by the same move, to lead to excessive segmentation. The main theoretical prediction of the PSR is that, in equilibrium, everyone will pay every year a premium reflecting his current risk, meaning that the risk of future risk evolution is not covered. This destruction of insurance is appreciated negatively by consumers. The trade-off is between, on the one hand, a lower price for insurance, and on the other hand, a lower quality of insurance. I simulate the cost of the PSR and find about 5–15 % of the total insurance cost. This order of magnitude is slightly smaller than the benefit one can expect from increased competition. All in all, a switching right limited in time would bring the benefits of competition and avoid most of the cost of segmentation. |
| Keywords: | Mortgage; Life insurance; Risk classification; Regulation; |
| JEL: | G22 G21 G18 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:dau:papers:123456789/14060&r=ias |
| By: | Murray, Anthony G; Farrin, Katie |
| Abstract: | A significant volume of research has investigated input subsidy programs in Africa, where government expenditures on such programs are non-trivial. This paper uses panel data from a sample of farm households in Zambia to compare how fertilizer use decisions change in the presence of a formal insurance market. If returns to fertilizer improve under an insurance regime, the use of index insurance can be an alternative to or complement of existing input subsidy programs in the country. After estimating the cost of a simple zero-one, actuarially fair index insurance product that is mandatory for farmers who purchase fertilizer, we run simulations to explore the effect of insurance on household investment in fertilizer. Results show that index insurance, by reducing the disposable wealth of households in years where no payouts occur, can dampen demand for fertilizer at the farm level. |
| Keywords: | weather insurance, technology adoption, Food Security and Poverty, International Development, D14, G22, Q12, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170240&r=ias |
| By: | Schubert, Manuel (University of Passau); Brück, Tilman (SIPRI) |
| Abstract: | We run a novel experiment to explore the relationship between the perception of real-life risks and the demand for risk reduction. Subjects play a series of loss lotteries in which the odds are matched to the likelihood of lethal events in real life. For each risk, subjects can pay premiums in order to reduce the likelihood of total bankruptcy. Our results show a complex interplay of mortality perception and demand for risk reduction. We observe that perceived annual mortality positively affects the demand for risk reduction. Moreover, we find certain risk characteristics to affect perceived mortality, others to drive the demand for risk reduction, and some to alter both. Our findings suggest that 30 percent of all insurance payments are due to biased perceptions of annual mortality while perfect precaution could lower payments by 45 percent. Implications for risk management policies are discussed. |
| Keywords: | risk perception, lethal risks, experiment, insurance |
| JEL: | C9 D81 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8578&r=ias |
| By: | Pawłowska-Tyszko, Joanna; Podstawka, Marian; Lelong, Pierre-Yves; Filipek-Kaźmierczak, Sebastian |
| Abstract: | The idea of social insurance – theoretical aspects. Social insurance in agriculture. The organisation and functioning of the Agricultural Social Insurance Fund (KRUS). The assessment of the agricultural social insurance system. |
| Keywords: | agriculture, social insurance, public finances, farmer, France, Poland, Labor and Human Capital, Public Economics, Risk and Uncertainty, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iafepr:164840&r=ias |