nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒08‒25
fourteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management
  1. Universal Basic Income versus Unemployment Insurance By Alice Fabre; Stéphane Pallage; Christian Zimmermann
  2. On the determinants of life insurance development in Sub-Saharan Africa: the role of the institutions quality in the effect of economic development By Samuel Guerineau; Relwende Sawadogo
  3. Retirement Reversals and Health Insurance: the Potential Impact of the Affordable Care Act By Joshua Congdon-Hohman
  4. Cash-in-Hand, Benefit Fraud and Unemployment Insurance By Long, Iain W.; Polito, Vito
  5. Does Insurance Development Affect the Financial Markets in developing countries? By Relwende Sawadogo; Samuel Guerineau
  6. Agricultural Farm Income and competitiveness of the tax and insurance systems By Pawłowska-Tyszko, Joanna; Soliwoda, Michał
  7. Main Determinants of Profit Sharing Policy in the French Life Insurance Industry By Fabrice Borel-Mathurin; Pierre-Emmanuel Darpeix; Quentin Guibert; Stéphane Loisel
  8. Construction of an Index that links Wind Speeds and Strong Claim Rate of Insurers after a Storm in France By Alexandre Mornet; Thomas Opitz; Michel Luzi; Stéphane Loisel
  9. How Insurers Differ from Banks: A Primer on Systemic Regulation By Christian Thimann
  10. The Welfare Cost of Inflation Risk Under Imperfect Insurance By Olivier Allais; Yann Algan; Edouard Challe; Xavier Ragot
  11. THE WELFARE COST OF INFLATION RISK UNDER IMPERFECT INSURANCE By Olivier Allais; Yann Algan; Edouard Challe; Xavier Ragot
  12. Employer-provided health insurance and equilibrium wages with two-sided heterogeneity By Arnaud Chéron; Pierre-Jean Messe; Jerome Ronchetti
  13. Identification of Insurance Models with Multidimensional Screening By Gaurab Aryal; Isabelle Perrigne; Quang Vuong
  14. Phase-type aging modeling for health dependent costs By Maria Govorun; Guy Latouche; Stéphane Loisel
  1. By: Alice Fabre (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université); Stéphane Pallage (CIRPEE and Département des Sciences Economiques - UQAM - Université du Québec à Montréal); Christian Zimmermann (Federal Reserve Bank of St. Louis)
    Abstract: In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need.
    Date: 2014–11
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01083459&r=ias
  2. By: Samuel Guerineau (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I); Relwende Sawadogo (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper analyzes the determinants of 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 institutions quality on the effect 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. 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 also find that the protection of property rights and the government stability are positively associated to life insurance. The results are robust to the introduction of more 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 effect of the economic development on life insurance is less for french legal system countries compared to non-french legal system countries.
    Date: 2015–07–21
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01178838&r=ias
  3. By: Joshua Congdon-Hohman (Department of Economics and Accounting, College of the Holy Cross)
    Abstract: This paper uses the longitudinal aspect of the Health and Retirement Study to explore the characteristics associated with reversals in retirement (referred to here as "unretirement"). Through the use of survival time analysis, this paper shows that health insurance status and its source are signicant predictors of unretirement decisions. The relationship is important as the potential impacts of the Affordable Care Act are considered. By comparing the role of health insurance provision to the impact of financial "shocks", the analysis finds that insurance is equally important as other financial explanations for retirement reversals. The analysis also shows that health insurance source plays a particularly important role for those who were previously open to the idea of working in retirement while they were still working.
    Keywords: Retirement, Unretirement, Retirement reversals, Health insurance
    JEL: J26 J22 H55 J32
    Date: 2014–07
    URL: http://d.repec.org/n?u=RePEc:hcx:wpaper:1501&r=ias
  4. By: Long, Iain W. (Cardiff Business School); Polito, Vito (Cardiff Business School)
    Abstract: Recent evidence questions the nature of the re-employment spike as unemployment insurance (UI) payments expire. Unemployed agents do not appear to devote more time to search and are observed leaving the UI scheme early without necessarily entering employment. We show that benefit fraud is consistent with both observations. Over time, UI recipients become increasingly willing to accept short-term cash-in-hand work. This takes them away from job search. Immediately before UI expiry, the risk of punishment for fraud exceeds the value of remaining payments. Recipients may voluntarily leave the scheme to accept cash-in-hand opportunities.
    Keywords: Cash-in-hand; Benefit fraud; Unemployment insurance; Re-employment spike
    JEL: J64 J65 K42
    Date: 2015–06
    URL: http://d.repec.org/n?u=RePEc:cdf:wpaper:2015/4&r=ias
  5. By: Relwende Sawadogo (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I); Samuel Guerineau (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper investigates the impact of insurance premiums on stock market development in 37 developing countries over the period 1987-2011. By controlling for the potential endogeneity bias, using the System GMM estimator, we show that the insurance premiums significantly increase the stock market total value traded. This result is robust to the use of alternative measure of stock market development and control of the political and legal system quality. In addition, the results highlight that an improvement in property rights promotes the deepening of the financial market. Thus, the results argue for insurance policies promoting and an improvement of the legal environment to benefit from the financial market development.
    Date: 2015–07–21
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01178840&r=ias
  6. By: Pawłowska-Tyszko, Joanna; Soliwoda, Michał
    Abstract: The aim of this study was to analyse the conditions and principles of functioning of the insurance system and the taxation on agriculture with regard to their impact on increasing efficiency and improving the competitiveness of the agricultural sector in order to make appropriate changes to these systems.
    Keywords: insurance system, tax, taxation, competitiveness, agricultural sector, Agricultural and Food Policy, Financial Economics, International Development,
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:ags:iafepr:207401&r=ias
  7. By: Fabrice Borel-Mathurin (ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Pierre-Emmanuel Darpeix (PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Quentin Guibert (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1, ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: We use a brand new data-set built from French supervisory reports to investigate the drivers of the participation rates served on euro-denominated life-insurance contracts over the period 1999-2013. Our analysis confirms practitioners’ insight on the alignment with the 10-years French government bond, yet we show that on aggregate, insurers serve less than this target. Our data indicate that financial margins are more strictly targeted than participation. We find evidence that lapses are fairly uncorrelated with participation, suggesting other levers to pilot surrenders. If higher asset returns can imply better yield for policyholders, riskier portfolios do not translate into better participation
    Date: 2015–06
    URL: http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01165475&r=ias
  8. By: Alexandre Mornet (Allianz, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1); Thomas Opitz (I3M - Institut de Mathématiques et de Modélisation de Montpellier - CNRS - UM2 - Université Montpellier 2 - Sciences et Techniques); Michel Luzi (Allianz); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: For insurance companies, wind storms represent a main source of volatility, leading to potentially huge aggregated claim amounts. In this article, we compare different constructions of a storm index allowing us to assess the economic impact of storms on an insurance portfolio by exploiting information from historical wind speed data. Contrary to historical insurance portfolio data, meteorological variables can be considered as stationary between years and are easily available with long observation records; hence, they represent a valuable source of additional information for insurers if the relation between observations of claims and wind speeds can be revealed. Since standard correlation measures between raw wind speeds and insurance claims are weak, a storm index focusing on high wind speeds can afford better information. This method has been used on the German territory by Klawa and Ulbrich and gave good results for yearly aggregated claims. Using historical meteorological and insurance data, we assess the consistency of the pro-posed indices construction and we test their sensitivity to their various parameters and weights. Moreover, we are able to place the major insurance events since 1998 on a broader horizon of 40+ years. Our approach provides a meteorological justification for calculating the return periods of extreme storm-related insurance events whose magnitude has rarely been reached.
    Date: 2014–07
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01081758&r=ias
  9. By: Christian Thimann (PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), Axa - AXA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)
    Abstract: This paper aims at providing a conceptual distinction between banking and insurance with regard to systemic regulation. It discusses key differences and similarities as to how both sectors interact with the financial system. Insurers interact as financial intermediaries and through financial market investments, but do not share the features of banking that give rise to particular systemic risk in that sector, such as the institutional interconnectedness through the interbank market, the maturity transformation combined with leverage, the prevalence of liquidity risk and the operation of the payment system. The paper also draws attention to three salient features in insurance that need to be taken account in systemic regulation: the quasiabsence of leverage, the fundamentally different role of capital and the ‘built-in bail-in’ of a significant part of insurance liabilities through policy-holder participation. Based on these considerations, the paper argues that if certain activities were to give rise to concerns about systemic risk in the case of insurers, regulatory responses other than capital surcharges may be more appropriate.
    Date: 2014–10–16
    URL: http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01074933&r=ias
  10. By: Olivier Allais (CORELA - Laboratoire de Recherche sur la Consommation - INRA); Yann Algan (CORELA - Laboratoire de Recherche sur la Consommation - INRA); Edouard Challe (CORELA - Laboratoire de Recherche sur la Consommation - INRA); Xavier Ragot (CORELA - Laboratoire de Recherche sur la Consommation - INRA)
    Abstract: What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specification for households' preferences towards money and consumption goods. Unlike traditional specifications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.
    Date: 2015–05
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01169656&r=ias
  11. By: Olivier Allais (Laboratoire de recherche sur la Consommation - Institut national de la recherche agronomique); Yann Algan (ECON - Département d'économie - Sciences Po); Edouard Challe (CEREG - Centre d'études et de recherches sur l'espace germanophone - Université Paris III - Sorbonne nouvelle); Xavier Ragot (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))
    Abstract: What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specication for households' preferences towards money and consumption goods. Unlike traditional specications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.
    Date: 2015–05–27
    URL: http://d.repec.org/n?u=RePEc:hal:psewpa:hal-01157168&r=ias
  12. By: Arnaud Chéron (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Université du Maine, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS); Pierre-Jean Messe (CEE - Centre d'études de l'emploi - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche - Ministère du Travail, de l'Emploi et de la Santé, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Université du Maine); Jerome Ronchetti (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Université du Maine)
    Abstract: This paper develops an equilibrium search model that allows rms to invest in worker's health. Heterogeneous health endowment of the employee is not observed by the employer, and rms also dier regarding their productivities. We emphasize that wage and health expenditure policies of the employer are tightly related, and show how those policies relate to rms' type. A noticeable implication is that there is an ambiguous relationship between wage earnings and health expenditures supported by firms.
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01100345&r=ias
  13. By: Gaurab Aryal; Isabelle Perrigne; Quang Vuong
    Abstract: This paper addresses the identification of insurance models with multidimensional screening where insurees have private information about their risk and risk aversion. The model also includes a random damage and the possibility of several claims. Screening of insurees relies on their certainty equivalence. The paper then investigates how data availability on the number of offered coverages and reported claims affects the identification of the model primitives under four different scenarios.We show that the model structure is identified despite bunching due to multidimensional screening and/or a finite number of offered coverages. The observed number of claims plays a key role in the identification of the joint distribution of risk and risk aversion. In addition, the paper derives all the restrictions imposed by the model on observables. Our results are constructive with explicit equations for estimation and model testing.
    Date: 2015–08
    URL: http://d.repec.org/n?u=RePEc:arx:papers:1508.02919&r=ias
  14. By: Maria Govorun (University of Western Ontario - University of Western Ontario); Guy Latouche (ULB - Université Libre de Bruxelles [Bruxelles] - ULB - Université Libre de Bruxelles); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: In the present paper we develop recursive algorithms to evaluate the distribution of the net present value (abbreviated as "NPV") of a health care contract. The duration of the program is a random variable representing the lifetime of an individual. We suggest a discrete time phase-type approach to model individual health care costs. In this approach, annual health care costs depend naturally on the health state of the individual. We also derive the distribution of the NPV assuming that annual health care costs are iid random variables. We demonstrate analytically that, under special parametrisation, the model with iid costs gives a similar expectation of the NPV to the one of the model with health dependent costs. We propose techniques to evaluate the impact of health related events and demonstrate it on numerical examples.
    Date: 2014–11
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01084274&r=ias
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