nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒06‒13
ten papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Optimal social assistance and unemployment insurance in a life-cycle model of family labor supply and savings By Haan, Peter; Prowse, Victoria
  2. Overcoming Barriers to Life Insurance Coverage: A Behavioral Approach By Anek Belbase; Norma B. Coe; April Yanyuan Wu
  3. Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk By Harenberg, Daniel; Ludwig, Alexander
  4. How do consumers choose health insurance? An experiment on heterogeneity in attribute tastes and risk preferences By Kairies-Schwarz, Nadja; Kokot, Johanna; Vomhof, Markus; Wessling, Jens
  5. Long-term care insurance and carers' labor supply: A structural model By Geyer, Johannes; Korfhage, Thorben
  6. The Effect of Statutory Sick Pay Regulations on Workers' Health By Halla, Martin; Pech, Susanne; Zweimüller, Martina
  7. Improving Employees’ Life and Disability Insurance Benefit Decisions: Results of an Employer Survey By Anek Belbase; Norma B. Coe; Matthew S. Rutledge
  8. How do unisex rating regulations affect gender differences in insurance premiums? By Vijay Aseervatham; Christoph Lex; Spindler, Martin
  9. Income shocks or insurance: What determines consumption inequality? By Ludwig, Johannes
  10. Immobilienkreditfonds: Systemisches Risiko oder Ergänzung zur Bankfinanzierung? By Bendel, Daniel; Demary, Markus; Haas, Heide

  1. By: Haan, Peter; Prowse, Victoria
    Abstract: We analyze empirically the optimal design of social insurance and assistance programs when families obtain insurance by making labor supply choices for both spouses. For this purpose, we specify a structural life-cycle model of the labor supply and savings decisions of singles and married couples. Partial insurance against wage and employment shocks is provided by social programs, savings and the labor supplies of all adult household members. The optimal policy mix focuses mainly on Social Assistance, which provides a permanent universal household income oor, with a minor role for temporary earnings-related Unemployment Insurance. Reecting that married couples obtain intra-household insurance by making labor supply choices for both spouses, the optimal generosity of Social Assistance decreases in the proportion of married individuals in the population. The link between optimal program design and the family context is strongest in low-educated populations.
    Keywords: life-cycle labor supply,family labor supply,unemployment insurance,social assistance,design of benefit programs,intra-household insurance,household savings,employment risk,added worker effect
    JEL: J18 J68 H21 I38
    Date: 2015
  2. By: Anek Belbase; Norma B. Coe; April Yanyuan Wu
    Abstract: While life insurance purchase decisions have long been studied, we still do not know how people decide if they need insurance or how much they need. Using in-depth interviews, we peer into the black box of employee decision-making to learn what people know about this employee-benefit, and how they decide if it is of value to them. We find that individuals understand the need for life insurance but find many behavioral economic barriers to getting adequate coverage, including mental accounting, money illusion, and the strong role of defaults. We then conduct an online experiment of the hypothetical employee-benefit purchase scenario and find a few, simple interventions could help individuals better decide their life insurance needs.
    Date: 2015–06
  3. By: Harenberg, Daniel; Ludwig, Alexander (Munich Center for the Economics of Aging (MEA))
    Abstract: When markets are incomplete, social security can partially insure against idiosyncratic and aggregate risks. We incorporate both risks into an analytically tractable model with two overlapping generations and demonstrate that they in- teract over the life-cycle. The interactions appear even though the two risks are orthogonal and they amplify the welfare consequences of introducing social security. On the one hand, the interactions increase the welfare benefits from insurance. On the other hand, they can in- or decrease the welfare costs from crowding out of capital formation. This ambiguous effect on crowding out means that the net effect of these two channels is positive, hence the interactions of risks increase the total welfare benefits of social security.
    JEL: C68 E27 E62 G12 H55
    Date: 2014–09–22
  4. By: Kairies-Schwarz, Nadja; Kokot, Johanna; Vomhof, Markus; Wessling, Jens
    Abstract: Recent health policy reforms try to increase consumer choice. We use a laboratory experiment to analyze consumers' tastes in typical contract attributes of health insurances and to investigate their relationship with individual risk preferences. First, subjects make consecutive insurance choices varying in the number and types of contracts offered. Then, we elicit individual risk preferences according to Cumulative Prospect Theory. Applying a latent class model to the choice data, reveals five classes of consumers with considerable heterogeneity in tastes for contract attributes. From this, we infer distinct behavioral strategies for each class. The majority of subjects use minimax strategies focusing on contract attributes rather than evaluating probabilities in order to maximize expected payoffs. Moreover, we show that using these strategies helps consumers to choose contracts, which are in line with their individual risk preferences. Our results reveal valuable insights for policy makers of how to achieve efficient consumer choice.
    Abstract: Jüngste Gesundheitsreformen versuchen, Wahlmöglichkeiten für Konsumenten zu verbessern. Wir verwenden ein Laborexperiment, um die Präferenzen von Konsumenten für typische Vertragsattribute von Krankenversicherungen zu analysieren und um ihre Beziehung zu individuellen Risikopräferenzen zu untersuchen. Zuerst treffen Teilnehmer aufeinanderfolgende Versicherungsentscheidungen, die in der Anzahl und der Art der angebotenen Verträge variieren. Anschließend erheben wir individuelle Risikopräferenzen im Sinne der kumulativen Prospect Theory. Ein auf die Entscheidungsdaten angewandtes Latent Class Modell kann fünf Klassen von Konsumenten mit einer beachtlichen Heterogenität in Präferenzen für Vertragsattribute identifizieren. Davon ausgehend leiten wir spezifische Verhaltensstrategien für jede Klasse ab. Die Mehrheit der Teilnehmer wendet Minimax-Strategien an und konzentriert sich auf Vertragsattribute, anstatt Wahrscheinlichkeiten zu bewerten um die erwartenden Auszahlungen zu maximieren. Ferner zeigen wir, dass die Anwendung dieser Strategien Konsumenten hilft, Verträge zu wählen, die mit ihren individuellen Risikopräferenzen übereinstimmen. Unsere Ergebnisse liefern wertvolle Einsichten für politische Entscheidungsträger, wie sie effiziente Wahlmöglichkeiten für Konsumenten erreichen können.
    Keywords: health insurance,risk preferences,heterogeneity,heuristics,laboratory experiment,cumulative prospect theory
    JEL: C91 I13 D81
    Date: 2014
  5. By: Geyer, Johannes; Korfhage, Thorben
    Abstract: In Germany, individuals in need of long-term care receive support through benefits of the long-term care insurance. A central goal of the insurance is to support informal care provided by family members. Care recipients can choose between benefits in kind (formal home care services) and benefits in cash. From a budgetary perspective family care is a cost-saving alternative to formal home care and to stationary nursing care. However, the opportunity costs resulting from reduced labor supply of the carer are often overlooked. We focus on the labor supply decision of family carers and the incentives set by the long-term care insurance. We estimate a structural model of labor supply and the choice of benefits of family carers. We find that benefits in kind have small positive effects on labor supply. Labor supply elasticities of cash benefits are larger and negative. If both types of benefits increase, negative labor supply effects are offset to a large extent.
    Abstract: Eines der zentralen Ziele der deutschen Pflegeversicherung ist die Unterstützung informeller Pflege durch Familienangehörige. Die Pflegeversicherung bietet anspruchsberechtigten Personen die Möglichkeit, zwischen verschiedenen Leistungen zur Unterstützung der häuslichen Pflege zu wählen. Pflegegeld kann entweder als Geldleistung direkt ausgezahlt werden oder als Sachleistung (in Form von formeller Pflege durch Pflegedienstleister) in Anspruch genommen werden. Werden ausschließlich die direkten Ausgaben der Pflegeversicherung berücksichtigt, erscheinen Geldleistungen und damit informelle Pflege durch Familienangehörige als kostengünstiger im Vergleich zu den teureren Alternativen der formellen häuslichen Pflege oder der stationären Pflege in Pflegeheimen. Unberücksichtigt bleiben dabei jedoch die Opportunitätskosten der informellen Pflege, die vor allem durch ein reduziertes Arbeitsangebot der Pflegenden entstehen können. Wir untersuchen deshalb die Veränderungen der Arbeitsangebotsentscheidung und des Pflegeverhaltens informell pflegender Haushaltsmitglieder durch veränderte Anreize der Pflegeversicherung. Dafür schätzen wir ein strukturelles Modell des Arbeitsangebots und der Nachfrage nach Leistungen aus der Pflegeversicherung. Unsere Ergebnisse zeigen kleine positive Arbeitsangebotseffekte durch eine Ausweitung der Sachleistungen und große negative Effekte durch eine Erhöhung der Geldleistungen. Kommt es zu einer simultanen Ausweitung beider Leistungen, gleichen sich die die gegenläufigen Effekte zu großen Teilen gegenseitig aus und der Arbeitsangebotseffekt bleibt moderat.
    Keywords: labor supply,long-term care,long-term care insurance,structural model
    JEL: J22 H31 I13
    Date: 2014
  6. By: Halla, Martin (University of Innsbruck); Pech, Susanne (University of Linz); Zweimüller, Martina (University of Linz)
    Abstract: Social insurance programs typically comprise sick leave insurance. An important policy parameter is how the cost of sick leave are shared between workers, firms, and the social security system. We show that this sharing rule affects not only absence behavior, but also workers' subsequent health. To inform our empirical analysis we propose a simple model, where workers' absence decision is taken conditional on the sharing rule, health, and a dismissal probability. Our empirical analysis is based on high-quality administrative data sources from Austria. Identification is guaranteed by idiosyncratic variation in the sharing rule (caused by different policy reforms and sharp discontinuities at certain tenure levels and firm sizes). An increase in either the workers' or the firms' cost share (both at the public expense) decrease the number of sick leave days. Variations in the workers' cost are quantitatively more important (by a factor of about two). Policy-induced variation in sick leave has a significant effect on subsequent health (care cost). The average worker in our sample is in the domain of presenteeism, i.e. an increase in sick leave (due to reductions in the workers' or the firms' cost share) would reduce health care cost.
    Keywords: statutory sick-pay regulations, sick leave, presenteeism, absenteeism, moral hazard, health care cost
    JEL: I18 J22 J38
    Date: 2015–05
  7. By: Anek Belbase; Norma B. Coe; Matthew S. Rutledge
    Abstract: The group benefits landscape is changing dramatically. The menu of available options has expanded, employers are paying for fewer benefits, and the responsibility for selecting the right benefit package has been increasingly left to the employee. However, very little is known about how individuals select their insurance benefits packages, if their selections are optimal for their circumstances, or what employers can do to encourage them to select the optimal benefit package. In this changing landscape, it is important to determine identify: (1) What are current employer practices and their resulting take-up and coverage patterns?; (2) Which practices influence employees’ selections?; and (3) What can employers do to make their employees’ selections closer to their optimal choices? The current study is the third in a series conducted by the Center for Retirement Research (CRR), in partnership with Prudential Financial Inc., to examine these questions. The first study utilizes in-depth interviews to find that, despite the similarities between life and long-term disability insurance products, decision processes vary dramatically (Coe and Belbase 2012). Individuals understand the need for life insurance, but they have a hard time determining how much insurance is necessary. The need for disability insurance is even less clear – disability incidence and the insurance product are not well understood and prone to behavioral biases – and it is infrequently purchased. The second study uses an online experiment to identify behavioral-economics-based interventions that affect life and disability insurance participation and coverage levels (Coe, Belbase, and Wu 2013). The results suggest that simple, personally relevant information, provided at the time of enrollment, can nudge individuals to overcome behavioral impediments and elect more optimal life and disability insurance coverage. Unlike the first two studies, which focused on the employee’s decision, the present study examines group benefits from the employer’s perspective. Data on employer practices, benefit information, and aggregate employee characteristics are obtained through a firm-level survey conducted by the Society for Human Resource Management. Survey results are used to describe the landscape of employer practices with respect to supplementary life and disability insurance and to investigate correlations between employer practices (such as cross-advertising group benefits with health insurance) and employee take-up.
    Date: 2015–06
  8. By: Vijay Aseervatham; Christoph Lex; Spindler, Martin (Munich Center for the Economics of Aging (MEA))
    Abstract: As of December 21, 2012, the use of gender as an insurance rating category was prohibited. Any remaining pricing disparities between men and women will now be traced back to the reasonable pricing of characteristics that happen to differ between the groups or to the pricing of characteristics that differ between sexes in a way that proxies for gender. Using data from an automobile insurer, we analyze how the standard industry approach to simply omit gender from the pricing formula, which allows for proxy effects, differs from the benchmark for what prices would look like if direct gender effects are removed and other variables do not adjust as proxies. We find that the standard industry approach will likely be influenced by proxy effects for young and old drivers. Our method can simply be applied to almost any setting where a regulator is considering a uniform-pricing reform.
    JEL: G22 K20 C20
    Date: 2014–09–19
  9. By: Ludwig, Johannes
    Abstract: Contrary to the implications of economic theory, consumption inequality in the US did not react to the increases in income inequality during the last three decades. This paper investigates if a change in the type of income inequality - from permanent to transitory - or a change in the ability to insure income shocks is responsible for this. A measure of household consumption is imputed into the Panel Study of Income Dynamics to create panel data on income and consumption for the period 1980-2010. The minimum distance investigation of covariance relationships shows that both explanations work together: the share of transitory shocks increases over time, but the capability to insure permanent and transitory shocks to income also improves. Together, these phenomena can explain the lack of an increase in consumption inequality.
    Abstract: Entgegen der Vorhersage ökonomischer Theorie reagiert die Ungleichheit des Haushaltskonsums in den USA nicht auf den Anstieg der Einkommensungleichheit der letzten drei Jahrzehnte. Dieses Papier untersucht, ob eine Veränderung der Art der Einkommensungleichheit - von permanenter zu transitorischer - dafür verantwortlich ist oder eine Veränderungen in der Fähigkeit der Haushalte, Einkommensschocks abzufedern. Ein Maß für Haushaltskonsum wird in die Daten der Panel Study of Income Dynamics imputiert, um einen Paneldatensatz für die Jahre 1980-2010 zu erstellen, der Einkommen und Konsum beinhaltet. Die Minimum Distance-Analyse der Kovarianzstrukturen zeigt, dass beide Erklärungsansätze gemeinsam wirken: Der Anteil transitorischer Schocks steigt im Zeitverlauf, aber die Fähigkeit, permanente und transitorische Einkommensschocks abzufedern, verbessert sich ebenfalls. Zusammen können diese Phänomene erklären, warum die Ungleichheit des Haushaltskonsums nicht ansteigt.
    Keywords: consumption inequality,income inequality,consumption insurance
    JEL: D12 D31 E21
    Date: 2015
  10. By: Bendel, Daniel; Demary, Markus; Haas, Heide
    Abstract: Kreditfonds und insbesondere Immobilienkreditfonds haben in den letzten Jahren zunehmend an Bedeutung gewonnen. Dieser Trend beruht zum einen darauf, dass diese Fonds im aktuellen Niedrigzinsumfeld für Investoren attraktive und stabile Cash-Flows generieren können. Auch für Banken und Versicherungen sind sie interessante Anlageobjekte. Zusätzlich ermöglicht der Einsatz von Kreditfonds Banken, Kredite zu veräußern und somit Risiken zu steuern und regulatorisches Eigenkapital freizusetzen. Da sich der europäische Verbriefungsmarkt noch nicht ausreichend von der Globalen Finanzkrise aus dem Jahr 2008 erholt hat, stellen Kreditfonds zunehmend eine interessante Ergänzung dar. Vor dem Hintergrund, dass das europäische Bankensystem die kriseninduzierte Bilanzrezession noch nicht hinreichend überwunden hat und die Banken vor allem in den Peripherieländern nur zögerlich Kredite vergeben, können Kreditfonds jedoch auch zu Konkurrenten von Banken werden. Im Rahmen dieses Policy Papers werden deshalb (i) die Vorteile der direkten Kreditvergabe durch Fonds analysiert, (ii) die Implikationen für die Finanzstabilität, Wettbewerb und den Investorenschutz aus dem zunehmenden Wachstum der Fonds hergeleitet und bewertet sowie (iii) die direkten Risiken, die durch Kreditfonds entstehen könnten, analysiert und Regulierungsmaßnahmen diskutiert. Es zeigt sich, dass Fonds Banken bei der Kreditvergabe unterstützen können. Dies gilt für die Finanzierung und Teilfinanzierung von Segmenten, für die Banken sehr viel Eigenkapital aufwenden müssten. Kreditfonds sind aber anfällig für einen plötzlichen und unerwarteten Abzug der Einlagen. Aus diesem Grund ist es unerlässlich, sie als geschlossene Fonds aufzulegen. Der Investorenkreis sollte sich zudem auf Institutionelle Investoren konzentrieren, da Kreditfonds in illiquide Kredite investieren und sehr stark dem Kreditzyklus ausgesetzt sind.
    Keywords: Banken und Versicherungen,Immobilien,Immobilienfinanzierung,Banking and Insurance,Property / Real Estate,Real Estate Financing
    Date: 2015

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