nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒07‒11
twenty papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Employers Opting Out of Public Disability Insurance: Selection or Incentive Effects? By Wolter H.J. Hassink; Pierre Koning; Wim Zwinkels
  2. Using probabilistic models to appraise and decide on sovereign disaster risk financing and insurance By Ley-Borrás,Roberto; Fox,Benjamin Daniel
  3. Les déterminants du développement de l'assurance-vie dans les pays d’Afrique Subsaharienne: le rôle de la qualité du système juridique et politique By Relwende SAWADOGO; Samuel GUERINEAU
  4. Analysis of the Philippine Health Insurance Corporation's Individually Paying Program and Employed Program By Silfverberg, Denise Valerie
  5. Reducing Early Childhood Tooth Decay: An Overview for State Policymakers By Leslie Foster; Meg Booth; Colin Reusch
  6. Equilibrium Labor Market Search and Health Insurance Reform By Aizawa, Naoki; Fang, Hanming
  7. Reducing Early Childhood Tooth Decay: Strategies for State Medicaid and CHIP Dental Program Managers By Colin Reusch; Meg Booth; Leslie Foster
  8. Reducing Early Childhood Tooth Decay: Leading Steps for State Policymakers By Leslie Foster; Meg Booth; Colin Reusch
  9. Sustainability of the National Government Premium Subsidy for Indigents By Pantig, Ida Marie T.
  10. Quantifying through ex post assessments the micro-level impacts of sovereign disaster risk financing and insurance programs By De Janvry,Alain F.
  11. Location and Product Choice in Option Demand Markets By Gilad Sorek
  12. Le développement des activités d’assurance affecte-t-il le développement du marché financier dans les pays en développement ? By Relwende SAWADOGO
  13. Coupling direction of the European Banking and Insurance sectors using inter-system recurrence networks By Peter Martey Addo
  14. Reinsurance and securitisation of life insurance risk: the impact of regulatory constraints By Pauline BARRIEU; Henri LOUBERGE
  15. Lethal lapses: How a positive interest rate shock might stress German life insurers By Feodoria, Mark; Förstemann, Till
  16. On the optimal provision of social insurance By Krueger, Dirk; Ludwig, Alexander
  17. Furthering the Implementation of AEC Blueprint Measures By Llanto, Gilberto M.; Medalla, Erlinda M.; del Prado, Fatima; Mantaring, Melalyn C.; Detros, Keith C.; Serafica, Ramonette B.; Ortiz, Ma. Kristina P.; Ortiz, Danica Aisa P.; Padronia, Pinky S.; Maddawin, Angelica B.; Ulep, Valerie Gilbert T.
  18. The Impact of Short- and Long-Term Participation Tax Rates on Labor Supply By Bartels, Charlotte; Pestel, Nico
  19. PJD 2013 Special Volume on Health By Reyes, Celia M.
  20. The Effect of Savings Accounts on Interpersonal Financial Relationships: Evidence from a Field Experiment in Rural Kenya By Dupas, Pascaline; Keats, Anthony; Robinson, Jonathan

  1. By: Wolter H.J. Hassink (Utrecht University School of Economics, the Netherlands); Pierre Koning (VU University Amsterdam, the Netherlands); Wim Zwinkels (VU University Amsterdam, the Netherlands)
    Abstract: This paper analyzes selection and incentive effects of opting out from public to private insurance on employer Disability Insurance (DI) inflow rates. We use administrative information on DI benefit costs and opting-out decisions of a balanced panel of about 140,000 employers that are observed between 2007 and 2011. We argue that the opting-out decision of employers was driven by current DI enrolment and anticipation effects that resulted from short-term expectations on DI costs. In particular, employers opted out when this was most rewarding for them in reducing DI premium rates. When controlling for these effects, our main finding is that there are no incentive effects due to opting out. Thus, publicly and privately insured employers show similar DI inflow rates.
    Keywords: Public versus private insurance; Disability insurance; Opting out; Longitudinal analyses
    JEL: C23 I13
    Date: 2015–07–07
  2. By: Ley-Borrás,Roberto; Fox,Benjamin Daniel
    Abstract: This paper presents an overview of the structure of probabilistic catastrophe risk models, discusses their importance for appraising sovereign disaster risk financing and insurance instruments and strategy, and puts forward a model and a process for improving decision making on the linked disaster risk management strategy and sovereign disaster risk financing and insurance strategy. The paper discusses governments'use of probabilistic catastrophe models to inform sovereign disaster risk financing decision making and describes the ex ante and expost financing instruments available for responding to extreme natural events. It also discusses the challenge of appraising sovereign disaster risk financing and insurance instruments, including a review of the multiple dimensions of disaster risks and the value that probabilistic catastrophe risk models provide. The decision making framework for sovereign disaster risk financing and insurance put forward by the paper includes the use of a decision model (an influence diagram) as a rigorous representation of the relationships between the decisions, uncertain events, and consequences relevant to sovereign disaster risk financing and insurance decision making. The framework also includes a process for generating high-quality customized components for the decision model, and a tool for designing coherent sovereign disaster risk financing and insurance strategies. The paper ends with suggestions for improving catastrophe risk models to facilitate sovereign disaster risk financing and insurance decision making.
    Keywords: Banks&Banking Reform,Labor Policies,Hazard Risk Management,Insurance&Risk Mitigation,Natural Disasters
    Date: 2015–07–02
  3. By: Relwende SAWADOGO; Samuel GUERINEAU (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: This paper analyzes the determinants of the life insurance development on a panel of 20 countries in sub-Saharan Africa over the period 1996-2011. It also highlights the role of the quality of institutions on the impact of economic development on the life insurance. Controlling for the presence of a possible endogeneity bias using the instrumental variable technique, we find evidence that increased of per capita income leads to an increase in life insurance premiums. Also, we show that the life insurance is a luxury good in SSA. The demographic variables such as life expectancy and the young dependency ratio influence negatively the life insurance development while the old dependency ratio has a positive effect. We find also that the protection of property rights and the government stability are positively associated to life insurance. The results are robust to the introduction of add variables. Furthermore, the marginal impact of the income per capita on the life insurance varies according to the quality of the legal and political environment. Finally, the marginal benefit from increased income is less for country French legal system.
    Keywords: Life insurance, economic development, Institutional Quality, instrumental variable
    JEL: C26 L60 G11 G22
    Date: 2015–06
  4. By: Silfverberg, Denise Valerie
    Abstract: The provision of social health insurance has been an increasingly popular mechanism for addressing financial barriers to health care in developing countries. In the Philippines, the social health insurance program known as PhilHealth has been expanding its breadth of coverage since its promulgation in 1995. This study looks at the regional- and provincial-level coverage of two different PhilHealth programs: the Individually Paying Program (voluntary) and the Employed Program (government and private), and identifies the possible reasons for the variation between provinces. Coverage levels for the Individually Paying Program were found to be considerably below the government's full coverage target. The regional average was found to be at 57 percent while provincial average was at 53 percent. For the Employed Program, both the private and government sectors have not achieved full coverage but the figures observed are promising. The private sector Employed Program's regional average is at 71 percent while the provincial average is at 75 percent. For the government Employed Program, the regional average lies at 74 percent while the provincial average is at 80 percent. The findings are possible propositions on how targeting should be implemented. For the government sector, no clear pattern was found based on the model presented.
    Keywords: Philippines, PhilHealth, employed program, individually paying program, social health insurance, universal health coverage
    Date: 2015
  5. By: Leslie Foster; Meg Booth; Colin Reusch
    Abstract: States across the nation are redesigning their health care systems to promote higher quality health care services, healthier populations, and lower per capita costs. Medicaid and the Children’s Health Insurance Program (CHIP) are playing key roles in health system redesign for the 31 million children enrolled in these programs.
    Keywords: Oral Health, Issue Brief, CMS, Early Childhood Tooth Decay, ECC, Overview, Medicaid dental services
    JEL: I
    Date: 2015–05–30
  6. By: Aizawa, Naoki (Federal Reserve Bank of Minneapolis); Fang, Hanming (University of Pennsylvania)
    Abstract: We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers’ health compositions. We estimate our model by Generalized Method of Moments using a combination of micro datasets including Survey of Income and Program Participation, Medical Expenditure Panel Survey and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from about 22% in the pre-ACA benchmark economy to less than 4%. We also find that income-based premium subsidies for health insurance purchases from the exchange play an important role for the sustainability of the ACA; without the premium subsidies, the uninsured rate would be around 18%. In contrast, as long as premium subsidies and health insurance exchanges with community ratings stay intact, ACA without the individual mandate, or without the employer mandate, or without both mandates, could still succeed in reducing the uninsured rates to 7.34%, 4.63% and 9.22% respectively.
    Keywords: Health; Health insurance; Health care reform; Labor market equilibrium
    JEL: G22 I11 I13 J32
    Date: 2015–07–02
  7. By: Colin Reusch; Meg Booth; Leslie Foster
    Abstract: Young children who are enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) can be at risk for developing early childhood caries (ECC). ECC is a chronic bacterial infection that causes severe tooth decay and can begin to develop before baby teeth erupt.
    Keywords: Oral Health, Issue Brief, CMS, Early Childhood Tooth Decay, ECC, Dental Program Managers, Medicaid dental services
    JEL: I
    Date: 2015–05–30
  8. By: Leslie Foster; Meg Booth; Colin Reusch
    Abstract: Young children who are enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) can be at risk for developing early childhood caries (ECC). ECC is a chronic bacterial infection that causes severe tooth decay and can begin to develop before baby teeth erupt. Children with ECC may experience pain, difficulty eating, developmental complications, and loss of days in day care or preschool. ECC is expensive to treat and untreated ECC can lead to other serious infections.
    Keywords: Oral Health, Issue Brief, CMS, Early Childhood Tooth Decay, ECC, State Policymakers, Medicaid dental services
    JEL: I
    Date: 2015–05–30
  9. By: Pantig, Ida Marie T.
    Abstract: The national subsidy for indigent PhilHealth members identified under the National Household Targeting System for Poverty Reduction (NHTS-PR) began in 2011, in line with the government's call for universal health coverage. The subsidy involved making all individuals identified under the NHTS-PR automatically eligible for PhilHealth benefits. In 2014, the subsidy reached PHP 35 billion, which was sourced from the sin tax revenue. According to literature, health service use is anticipated to improve along with health insurance coverage. This paper explores how this change will affect the funds coming from the sin tax revenue for premium subsidy and PhilHealth's resources for benefit payment by examining administrative data and estimating loss ratios. The study finds that resources will be available for the premium subsidies but PhilHealth's collection from premiums will be much lower than the benefit payments.
    Keywords: Philippines, PhilHealth, social health insurance, universal health coverage, national government subsidy, premium subsidy
    Date: 2015
  10. By: De Janvry,Alain F.
    Abstract: Uninsured natural disasters can have devastating effects on human welfare and economic growth, particularly in developing countries where large segments of the population are in poverty and government resources and capacity to assist in relief, recovery, and reconstruction are limited. Therefore there is interest in exploring how these countries can design and implement disaster relief financing and insurance programs. This paper discusses four aspects of the microeconomics of disaster relief financing and insurance programs that are important for the ex post impact evaluation of such programs: (1) use of game setups to analyze the private willingness-to-pay for disaster protection through risk transfer or risk retention instruments; (2) use of ex post analysis of existing disaster relief financing and insurance schemes (such as Mexico?s programs) to analyze the willingness to provide political support to such schemes; (3) use of ex post analysis of existing schemes to analyze not only ex post coping with shock, but also the ex ante risk management impact of disaster relief financing and insurance schemes, with the expectation that the latter can have a large effects on growth; and (4) use of mainly global data to do ex post impact analysis of natural disasters and the resilience-enhancing value of disaster relief financing and insurance schemes (examples exist for the disaster-impact relationship that can be extended to the role of disaster relief financing and insurance in risk reduction, coping with shock, and risk management). The paper proposes concrete research projects to pursue the analysis of these four dimensions of micro-level impacts of disaster relief financing and insurance.
    Keywords: Labor Policies,Hazard Risk Management,Insurance&Risk Mitigation,Climate Change Economics,Natural Disasters
    Date: 2015–07–02
  11. By: Gilad Sorek
    Abstract: Consumers' uncertainty regarding their future needs generates demand for options to utilize different products. Such options are commonly sold in the form of insurance. A prime example for option demand presents in health care markets and other repair markets. This work studies two-dimensional spatial competition between medical providers who choose their geographical location and medical-care specialization (i.e. product differentiation). Consumers know their geographical address but do not know their preferred medical treatment before getting sick. Providers make location and product choices and then compete by selling options to utilize their services (i.e. health insurance). I characterize two types of equilibria: one with Min-Min differentiation that is complete assimilation and the other with Min-Intermediate differentiation, in which both providers locate at the city center and product differentiation is efficient. In the first equilibrium each consumer buys insurance for one provider only and in the second all consumers are buying insurance for both providers. I further show that under regulated locations product differentiation first increases with regulated geographic distance and then it decreases. For intermediate regulated distance consumers who reside around the city center buy insurance for both providers and those at the city ends buy insurance only for the nearby provider.
    Keywords: Location; Product Differentiation; Option Demand
    JEL: I11 I13 L1
    Date: 2015–06
  12. By: Relwende SAWADOGO
    Abstract: This paper investigates the impact of insurance premium on the development of stock market in 37 developing countries over the period of 1987-2011. Controlling for the potential endogeneity bias, we use the dynamic panel Method (System GMM), we show that the insurance premiums significantly increase stock market transaction. In addition, the results highlight that an improvement in property rights promotes the deepening of the stock market. The results call for insurance policies promoting and an improvement in the legal environment in order to benefit from the development of the financial market.
    Keywords: Stock market, insurance, legal environment in order
    JEL: G10 G22 K40
    Date: 2015–06
  13. By: Peter Martey Addo (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)
    Abstract: Modern financial systems exhibit a high degree of interdependence making it difficult in predicting. This has raise concerns on the correct identification of coupling direction in financial sectors of the economy. This study explores a “two-way” risk connection between the European banking and insurance sector based on geometrical closeness of observations. Specifically, the study looks at the inter-system recurrence networks in tracing dynamical transitions and detecting coupling direction between these sectors. The overall results shows that the banking sector is central in risk transmission compared to the insurance sector. A comprehensive discussion of the feasibility and relevance of the approach in studying systemic risk is provided.
    Abstract: Les systèmes financiers modernes présentent un degré élevé d'interdépendance rendant difficile la prédiction. Cela a soulevé des questions concernant l'identification correcte d'une direction de couplage dans les secteurs financiers de l'économie. Cette étude explore "en deux sens" la connexion des risques entre le système bancaire européen et le secteur de l'assurance, basée sur la proximité géométrique des observations. Plus précisément, l'étude se penche sur les réseaux de récurrence inter-système en traçant des transitions dynamiques et en détectant la direction de couplage entre ces secteurs. Les résultats globaux montrent que le secteur bancaire est un élément central dans la transmission de risque par rapport au secteur de l'assurance. Une discussion complète de la faisabilité et la pertinence de l'approche dans l'étude du risque systémique est fournie.
    Date: 2015–06
  14. By: Pauline BARRIEU (London School of Economics); Henri LOUBERGE (University of Geneva and Swiss Finance Institute)
    Abstract: Large systematic risks, such as those arising from natural catastrophes, climatic changes and uncertain trends in longevity increases, have risen in prominence at a societal level and, more particularly, have become a highly relevant issue for the insurance industry. Against this background, the combination of reinsurance and capital market solutions (insurance-linked securities) has received an accrued interest. In this paper, we develop a general model of optimal risk-sharing among three representative agents – an insurer, a reinsurer and a financial investor, making a distinction between systematic and idiosyncratic risks. We focus on the impact of regulation on risk transfer, by differentiating reinsurance and securitisation in terms of their impact on reserve requirements. Our results show that different regulatory prescriptions will lead to quite different results in terms of global risk-sharing.
    Keywords: Reinsurance, Risk sharing, Risk measures, Longevity risk, Insurance-Linked securities
    JEL: G22
  15. By: Feodoria, Mark; Förstemann, Till
    Abstract: Life insurers typically grant policyholders a surrender option. We demonstrate that the resulting lapse risk could materialise in the form of a "policyholder run" if interest rates were to increase sharply. An inverse stress test based on a unique set of regulatory panel data suggests that German life insurers have become less resistant to an upward interest rate shock in the course of the financial and sovereign debt crisis from 2007 to 2011. Despite the challenges presented by the low-interestrate environment, the situation has not deteriorated since then. In light of the quantitative easing (QE) of monetary policy in the euro area, life insurers may find it difficult to continue this positive trend.
    Keywords: life insurance,interest rate risk,lapse risk,rational policyholder run,inverse stress test
    JEL: G22 G33 C72 C13
    Date: 2015
  16. By: Krueger, Dirk; Ludwig, Alexander
    Abstract: In this paper we compute the optimal tax and education policy transition in an economy where progressive taxes provide social insurance against idiosyncratic wage risk, but distort the education decision of households. Optimally chosen tertiary education subsidies mitigate these distortions. We highlight the importance of two different channels through which academic talent is transmitted across generations (persistence of innate ability vs. the impact of parental education) for the optimal design of these policies and model different forms of labor as imperfect substitutes, thereby generating general equilibrium feedback effects from policies to relative wages of skilled and unskilled workers. We show that subsidizing higher education has important redistributive benefits, by shrinking the college wage premium in general equilibrium. We also argue that a full characterization of the transition path is crucial for policy evaluation. We find that optimal education policies are always characterized by generous tuition subsidies, but the optimal degree of income tax progressivity depends crucially on whether transitional costs of policies are explicitly taken into account and how strongly the college premium responds to policy changes in general equilibrium.
    Keywords: Progressive Taxation,Education Subsidy,Transitional Dynamics
    JEL: E62 H21 H24
    Date: 2015
  17. By: Llanto, Gilberto M.; Medalla, Erlinda M.; del Prado, Fatima; Mantaring, Melalyn C.; Detros, Keith C.; Serafica, Ramonette B.; Ortiz, Ma. Kristina P.; Ortiz, Danica Aisa P.; Padronia, Pinky S.; Maddawin, Angelica B.; Ulep, Valerie Gilbert T.
    Abstract: The study identifies outstanding issues and bottlenecks and provides recommendations to facilitate the Philippines' full compliance to its commitments to the ASEAN Economic Community (AEC). Various in-depth interviews and surveys were conducted with concerned stakeholders from government agencies and the private sector to bring to fore the issues and bottlenecks for policymakers' action. Although its focus is mainly on services and investment liberalization, this study also tracks policy changes in trade facilitation, nontariff measures, standards and conformance, and mutual recognition arrangements after the release of the 2010/2011 AEC Scorecard Reports.
    Keywords: Philippines, ASEAN economic integration, AEC scorecard, services liberalization, investment liberalization, trade facilitation, nontariff measures, standards and conformance, mutual recognition arrangements, ASEAN comprehensive investment agreement, medical professionals, maritime transport, telecommunications, tourism, banking, insurance, health services
    Date: 2015
  18. By: Bartels, Charlotte (Freie Universität Berlin); Pestel, Nico (IZA)
    Abstract: Generous income support programs as provided by European welfare states have often been blamed to hamper employment. This paper investigates the importance of incentives inherent in the tax-benefit system for the individual decision to take up work. Using German microdata over the period 1993-2010 we find that recent reforms in Germany increased work incentives at the extensive margin measured by the Participation Tax Rate (PTR), particularly for low-income individuals. Work incentives are even higher if the time horizon is extended to more than one year, pointing at an overestimation of the disincentives by standard measures. Regression analysis reveals that a decrease in the PTR increases the likelihood of taking up work significantly.
    Keywords: labor force participation, work incentives, welfare, unemployment insurance, income taxation
    JEL: H24 H31 J22 J65
    Date: 2015–06
  19. By: Reyes, Celia M.
    Abstract: The Aquino Health Agenda of 2010 articulates succinctly the Philippine health sector's aim for universal health coverage. The agenda has three thrusts: rapid expansion of enrollment and benefit delivery using subsidies for the poorest families, improved access to quality hospitals and health-care facilities, and attainment of health-related Millennium Development Goals through additional effort and resources targeted to the most critical areas in the country. Years after the launch of the agenda, the Department of Health collaborated with key institutions to implement the Health Systems Research Management (HSRM) Project, with the Philippine Institute for Development Studies as one of the collaborators. Through this HSRM project, several research projects were carried out, providing critical updates and new information on the progress of the health sector's Aquino Health Agenda. Several of these critical updates and new information are presented in this special volume of the Philippine Journal of Development. The volume focuses on health financing and service delivery, particularly PhilHealth coverage, household spending for health, and health infrastructure.
    Keywords: Philippines, PhilHealth, universal health coverage, health financing, health, Health Systems Research Management (HSRM), health service delivery
    Date: 2015
  20. By: Dupas, Pascaline; Keats, Anthony; Robinson, Jonathan
    Abstract: The welfare impact of expanding access to bank accounts depends on whether accounts crowd out pre-existing financial relationships, or whether private gains from accounts are shared within social networks. To study the effect of accounts on financial linkages, we provided free bank accounts to a random subset of 885 households. Within households, we randomized which spouse was offered an account and find no evidence of negative spillovers to spouses. Across households, we document positive spillovers: treatment households become less reliant on grown children and siblings living outside their village, and become more supportive of neighbors and friends within their village.
    Keywords: financial access; social insurance; spillovers
    JEL: C93 D14 G21 O16
    Date: 2015–07

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