nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒04‒19
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Increasing Employer Responsibility for Disability Benefits: Analysis of an Approach to Social Security Disability Insurance Reform By David R. Mann David C. Stapleton
  2. United States: Financial Sector Assessment Program-Detailed Assessment of Observance on the Insurance Core Principles By International Monetary Fund
  3. Weather insurance savings accounts By Stein,Daniel Kevin; Tobacman,Jeremy
  4. Quality Healthcare and Health Insurance Retention: Evidence from a Randomized Experiment in the Kolkata Slums By Delavallade, Clara
  5. South Africa: Financial Sector Assessment Program-Detailed Assessment of Observance on the Insurance Core Principles By International Monetary Fund
  6. Managing Risk with Insurance and Savings: Experimental Evidence for Male and Female Farm Managers in the Sahel By Delavallade, Clara; Dizon, Felipe; Hill, Ruth; Petraud, Jean Paul
  7. Who should monitor job sick leave? By Carlo Alberto Biscardo; Alessandro Bucciol; Paolo Pertile
  8. Personal Pensions with Risk sharing: Affordable, Adequate and Stable Private Pensions in Europe By Bovenberg, A Lans; Nijman, Theo E
  9. South Africa: Financial Sector Assessment Program-Financial Safety Net, Bank Resolution, and Crisis Management Framework-Technical Note By International Monetary Fund
  10. Market Socialism and Community Rating in the Affordable Care Act By Frech, Ted
  11. Dementia vs. somatic conditions in the German LTC-system: A longitudinal analysis By Ehing, Daniel; Hagist, Christian

  1. By: David R. Mann David C. Stapleton
    Keywords: disability insurance, Social Security Disability Insurance, short-term disability insurance
    JEL: I J
    Date: 2015–02–28
  2. By: International Monetary Fund
    Abstract: U.S. insurance supervision has been significantly strengthened in recent years. Lessons have been learned from the financial crisis and many of the recommendations of the 2010 FSAP are being addressed. Insurance has been brought within the scope of system-wide oversight of the financial sector. The establishment of the Federal Insurance Office (FIO) has created a mechanism for identifying national priorities for reform and development. The extension of the Federal Reserve Board’s responsibilities to cover consolidated supervision of insurance groups has strengthened supervision of the affected groups (now covering around 30 percent of total premium income in the United States) and promises to empower U.S. regulators in the negotiation and implementation of new international standards of insurance regulation. State regulators have been adjusting to the new regulatory architecture, at the same time progressing important reforms such as the solvency modernization initiative and significantly strengthening group and international supervision.
    Keywords: Financial Sector Assessment Program;Insurance regulations;Insurance supervision;Reports on the Observance of Standards and Codes;United States;
    Date: 2015–04–02
  3. By: Stein,Daniel Kevin; Tobacman,Jeremy
    Abstract: Better insurance against rainfall risk could improve the security of hundreds of millions of agricultural households around the world. However, customers have shown little demand for stand-alone insurance products. This paper theoretically and experimentally analyzes an innovative financial product called a Weather Insurance Savings Account (WISA), which combines savings and rainfall insurance. The paper uses a standard model of intertemporal insurance demand to study how customers'demand for a WISA varies with the amount of insurance offered. A laboratory experiment is then used to elicit participants'valuations of pure insurance, pure savings, and intermediate WISA types. Contrary to the standard model, within-subjects comparisons show that many participants prefer both pure insurance and pure savings to any interior mixture of the two, suggesting that market demand for a WISA is likely to be low. Additional experimental and observational evidence distinguishes between several alternative explanations. One possibility that survives the additional tests is diminishing sensitivity to losses, as in prospect theory.
    Keywords: Debt Markets,Financial Intermediation,Insurance&Risk Mitigation,Hazard Risk Management,Emerging Markets
    Date: 2015–04–08
  4. By: Delavallade, Clara (SALDRU, School of Economics, University of Cape Town and IFPRI)
    Abstract: Health care in developing countries is often unreliable and of poor quality, reducing incentives to use quality health services. Using data from a field experiment in India, I show that providing initial quality care improves the demand for quality health care by raising intended health insurance renewal and subsequent use of quality services. Randomly offering insurance policyholders a free consultation with a qualified doctor has a twofold effect: receiving this additional benefit raises willingness to pay to renew health insurance by 56 percent, exposed individuals are 11 percentage points more likely to consult a qualified practitioner when ill after the consultation.
    Keywords: access to and demand for quality healthcare, micro health insurance retention, willingness to pay, trust, poverty, India
    JEL: I13 I15 O15
    Date: 2015
  5. By: International Monetary Fund
    Abstract: This paper discusses key findings of the Detailed Assessment of Observance on the Insurance Core Principles on South Africa. Insurance regulatory and supervisory regime in South Africa is in transition. Currently, the Financial Services Board (FSB-SA) regulates the nonbanking financial services industry, including the insurance sector, in South Africa. With the goal of achieving a safer financial sector to serve South Africa better, the government has proposed major changes in the financial sector. The four policy objectives are: financial stability, consumer protection and market conduct, financial inclusion, and combating financial crime. Market realities in the insurance sector pose significant regulatory challenges, which are well recognized by the authorities.
    Keywords: Financial Sector Assessment Program;Insurance regulations;Insurance supervision;Reports on the Observance of Standards and Codes;South Africa;
    Date: 2015–03–03
  6. By: Delavallade, Clara (SALDRU, School of Economics, University of Cape Town and IFPRI); Dizon, Felipe (University of California Davis); Hill, Ruth (The World Bank); Petraud, Jean Paul (IMPAQ International)
    Abstract: Although there is fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. This paper uses a randomized field experiment in Senegal and Burkina Faso to compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. The paper finds that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even controlling for access to informal insurance and differences in crop choice. It is hypothesized that this finding results from the fact that, although men and women are equally exposed to yield risk, women face additional sources of lifecycle risk—particularly health risks associated with fertility and childcare—that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This finding suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.
    Keywords: risk, insurance, savings, gender
    JEL: O12
    Date: 2015
  7. By: Carlo Alberto Biscardo (INPS, Verona); Alessandro Bucciol (Department of Economics (University of Verona)); Paolo Pertile (Department of Economics (University of Verona))
    Abstract: We use a large and unique administrative dataset from Italy, covering the period 2009-2014, to investigate opportunistic behavior (moral hazard) and the effectiveness of monitoring policies related to insurance against illness-related income losses. The analysis is based on the outcome of mandatory medical visits aimed at verifying the health status of employees during sickness spells. We find that employers are more effective than the public insurer in selecting sickness episodes to monitor. However, a reduction in the number and a better targeting of visits with the support of appropriate statistical tools may close the gap. We discuss the impact of using direct measures of health, such as the outcome of a medical visit, on the study of the determinants of opportunistic behavior and argue that simply looking at days of work lost, without appropriately controlling for health status, may lead to misleading conclusions if the goal is studying moral hazard.
    Keywords: sick leave insurance, moral hazard, absenteeism, work ability
    JEL: D03 I18
    Date: 2015–04
  8. By: Bovenberg, A Lans; Nijman, Theo E
    Abstract: Private pension provision faces the challenging task of providing stable income streams during retirement. The challenge has increased markedly in the last decades due to volatile financial markets, falling interest rates and the withdrawal of employers and external insurers as risk bearers of systematic financial and longevity risks. Partly because of these developments, policyholders desire pensions tailored to their individual needs. This paper proposes a new type of pension: the Personal Pension with Risk sharing (PPR). By unbundling and valuing the investment, (dis)saving, insurance and risk-sharing functions of pensions, PPRs allow risk management and (dis)saving to be customized to the specific features of heterogeneous individuals. Moreover, unlike variable annuities, PPRs allow investment risks to be combined with longevity insurance without giving rise to high year-on-year volatility in consumption streams or opaque and rigid valuation and smoothing rules. The unbundling of functions in the PPR also deepens the internal markets for financial and insurance products while at the same time accommodating the diverse traditions of countries in terms of occupational pension provision. Finally, the PPR reconciles financial, fiscal and macroeconomic stability with growth by increasing the supply of long-term risk-bearing and illiquid capital, complementing public retirement provision, reducing the interest-rate sensitivity of pensions and smoothing shocks.
    Keywords: decumulation phase; defined benefit; defined contribution; longevity insurance; private pensions; risk management; risk sharing; variable annuities
    JEL: D14 D91 E21 E62 G11 G22 G23 G28 H31 H55 J14 J18 J26 J62 P43
    Date: 2015–04
  9. By: International Monetary Fund
    Abstract: This Technical Note discusses recommendations made during the Financial Sector Assessment Program (FSAP) for South Africa in the areas of contingency planning, crisis management, and bank resolution. The proposed scope of the new resolution regime and of the South African Reserve Bank’s (SARB) jurisdiction as the resolution authority remains unclear. It is suggested that authorities should consider focusing on all deposit-taking institutions and only those other financial institutions that are currently deemed systemic. Non-deposit-taking financial institutions that are not found to be systemic should be resolved by the Prudential Authority or the Market Conduct Authority, whichever is the lead regulator.
    Keywords: Financial Sector Assessment Program;Financial sector;Financial safety nets;Financial risk;Bank resolution;Bank supervision;Intervention;Deposit insurance;Crisis prevention;Risk management;South Africa;
    Date: 2015–03–03
  10. By: Frech, Ted
    Keywords: Social and Behavioral Sciences
    Date: 2015–04–13
  11. By: Ehing, Daniel; Hagist, Christian
    Abstract: This paper analyzes prevalence and incidence rates as well as survival times for people above the age of 60 years with a dementia disorder and/or a long-term care status. Using claim data from a social sickness funds in Germany (AOK-Plus), we show that there exists a with age increasing gap between the prevalence of women and men for both fields of study. This discrepancy cannot be explained completely by our estimated incidence rates and is caused by different survival times in long-term care and dementia. In long-term care 50 percent of all women (men) are dead after 44 (25) months, whereas about 57 (49) percent of all women (men) with dementia are alive after the end of our 48 month long observation period. The lower mortality of people with dementia is mainly explained by a large share of people who are not eligible for the German long-term care system. Estimating several cox models shows that the hazard of dying in long-term care increases with age and care level. However younger people with a dementia disorder show lower mortality rates in long-term care than their respective peer group without dementia. Looking at the present value of all long-term care costs for people with and without a dementia diagnosis, we find total average costs of 68,600 (44,857) Euro for women (men) without dementia. Due to their extended stay in nursing home care, women (men) with dementia are more expensive (80,201 (49,793) Euro).
    Keywords: dementia,long-term care,incidence rate,prevalence rate,survival analysis,costs of long-term care
    JEL: I19 H55
    Date: 2015

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