nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒10‒17
fifteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Nudging Life Insurance Holdings in the Workplace By Harris, Timothy; Yelowitz, Aaron
  2. Risk selection under public health insurance with opt-out By Panthöfer, S.;
  3. Does health insurance encourage the rise in medical prices? By Dormont, B.;; Péron, M.;
  4. Research Ideas for the Journal of Health & Medical Economics: Opinion By Chang, C-L.; McAleer, M.J.
  5. Another perspective on the high uninsured-rate in the USA: Crowding out of long term health insurance by the institutional setting of the U.S. health insurance system By Ines Läufer; ; ;
  6. The Inequality Accelerator By Pancrazi, Roberto; Mengus , Eric
  7. Optimality of deductible for Yaari's model: a reappraisal By Alain Chateauneuf; Michèle Cohen; Mina Mostoufi; Jean-Christophe Vergnaud
  8. The feasibility of index-based insurance as a risk management tool in Central Asia By Grigoreva, Diana; Bobojonov, Ihtiyor; Aw-Hassan, Aden; Biradar, Chandrashekar; Nurbekov, Aziz
  10. The impact of unemployment insurance savings accounts on subsequent employment quality By Nagler P.
  11. Bancarizing with Credit Cards: Experimental Evidence on Interest Rates and Minimum Payments Elasticities for New Clients By Seira Enrique; Castellanos Pascacio Sara Gabriela; Jiménez Hernández Diego J.
  12. The Affordable Care Act and the labor market: a first look By Pinkovskiy, Maxim L.
  13. Public Expenditure Projections for Health and Long-Term Care for China Until 2030 By Luca Lorenzoni; David Morgan; Yuki Murakami; Chris James
  14. Missing work is a pain: the effect of Cox-2 inhibitors on sickness absence and disability pension receipt By Bütikofer, A.;; Skira, M.;
  15. The hunt for duration: not waving but drowning? By Dietrich Domanski; Hyun Song Shin; Vladyslav Sushko

  1. By: Harris, Timothy; Yelowitz, Aaron
    Abstract: Using administrative data from a large public university, we analyze a policy designed to increase employer-sponsored life insurance. The University always had a supplemental life insurance plan available for its workers. In 2008, it increased its provision of basic coverage from a $10,000 to 1x salary. Workers initially paying for supplemental life insurance were in a position to completely undo the increase in basic coverage by scaling back supplemental elections, yet their default choice in 2008 was to continue at their existing level from 2007. The increased provision of basic coverage therefore represents a nudge for employees to increase life insurance. The nudge increased life insurance holdings one-for-one, both in the short and long-run, even for workers who actively made changes to other fringe benefits. New hires, who had to make an active choice, elected less supplemental coverage after 2008 relative to earlier cohorts of new hires, providing additional evidence of a significant degree of inertia among existing workers. Additionally, we find evidence of inertia for high earners constrained by the maximum limits. Data from a national sample of job changers show minimal crowd-out of individual market coverage from increased employer- sponsored life insurance. Further, we discuss the desirability of the nudge and find that the increase in basic coverage decreased life insurance dis- parities for two-thirds of employees
    Keywords: Life Insurance, Inertia
    JEL: D03 D31 G22 H20 J32 J33 J38
    Date: 2015–10–09
  2. By: Panthöfer, S.;
    Abstract: This paper examines risk selection in a parallel public and private health insurance system in which some, but not all, individuals can purchase substitutive private insurance by opting out of otherwise mandatory public insurance. Using a theoretical model, I show that public insurance is adversely selected when insurers and insureds are symmetrically informed about health-related risks, and that there can be any type of selection (advantageous or adverse) when insureds are privately informed. Using the German Socio-Economic Panel, I present evidence on the selection between public and private health insurance in Germany, which is one of the countries with such a health insurance system. I find that: (1) public insurance is adversely selected, (2) individuals adversely select public insurance based on self-assessed health and advantageously select public insurance based on risk aversion, and (3) there is evidence suggesting the presence of asymmetric information between private insurers and their clients.
    Keywords: public and private health insurance; risk selection; asymmetric information;
    JEL: D82 H51 I13
    Date: 2015–09
  3. By: Dormont, B.;; Péron, M.;
    Abstract: Our purpose is to evaluate the influence of health insurance coverage on the use of specialists who balance bill. We estimate the impact on patients' behavior of a shock consisting of better coverage of balance billing, while controlling for supply side drivers. We use a panel data set of 43,111 French individuals observed between January 2010 and December 2012. Individuals are observed when they are all covered by the same supplementary insurer, with no coverage for balance billing, and after 3,819 of them switched to other supplementary insurers which offer better coverage. Our estimations show that better coverage contributes to a rise in medical prices by increasing the demand for specialists who balance bill: for individuals who enjoy better coverage the proportion of consultations of specialists who balance bill is increased by 9%, and balance billing charged per consultation by 32%. However, the impact of the coverage shock depends on local supply side organization. When the proportion of specialists who do not balance bill their patients is high enough, patients have a real choice between specialist type: there is neither evidence of an inflationary effect of supplementary coverage, nor of limits in access to care due to balance billing.
    Keywords: health insurance; balance billing; health care access;
    JEL: I13 I18 C23
    Date: 2015–09
  4. By: Chang, C-L.; McAleer, M.J.
    Abstract: The purpose of this Opinion article is to discuss some ideas that might lead to papers that are suitable for publication in the Journal of Health and Medical Economics. The suggestions include the affordability and sustainability of universal health care insurance, monitoring and managing costs associated with public and private health and medical care coverage, panel data models based on industrial organization and corporate finance, and health and medical investment finance.
    Keywords: universal health care insurance, public health and medical care coverage, private health and medical care coverage, industrial organization, corporate finance, health and medical investment finance
    JEL: C5 I11 I13 I18
    Date: 2015–09–01
  5. By: Ines Läufer; ; ;
    Date: 2014–02
  6. By: Pancrazi, Roberto (Department of Economics University of Warwick); Mengus , Eric (HEC Paris)
    Abstract: We show that the transition from an economy characterized by idiosyncratic income shocks and incomplete markets a la Aiyagari (1994) to markets where statecontingent assets are available but costly (in order to purchase a contingent asset, households have to pay a xed participation cost) leads to a large increase of wealth inequality. Using a standard calibration our model can match a Gini of 0.93 close to the level of wealth inequality observed in the US. In addition, under this level of participation costs, wealth inequality is particularly sensitive to income inequality. We label this phenomenon as the Inequality Accelerator. We demonstrate how costly access to contingent asset-markets generates these eects. The key insight stems from the non-monotonic relationship between wealth and desired degree of insurance, in an economy with participation costs. Poor borrowing constrained households remain uninsured, middle-class households are almost perfectly insured, while rich households decide to self-insure by purchasing risk-free assets. This feature of households' risk management has crucial eects in asset prices, wealth inequality, and social mobility.
    Keywords: Wealth Inequality ; Participation costs ; Insurancecreation-date: 2015
    JEL: D31 E21 G11
  7. By: Alain Chateauneuf (IPAG - Centre d'Economie de la Sorbonne - Paris School of Economics); Michèle Cohen (Centre d'Economie de la Sorbonne - Paris School of Economics); Mina Mostoufi (Centre d'Economie de la Sorbonne - Paris School of Economics); Jean-Christophe Vergnaud (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: The main purpose of this paper is to show that left monotone risk aversion, a meaningful refinement of strong risk aversion, characterizes Yaari's decision makers for whom deductible insurance is optimal. A second goal is to offer a detailed proof of the deductible's computation, which proves the tractability of Yaari's model under left-monotone risk aversion
    Keywords: Yaari's model; Jewitt's left-monotone risk aversion; optimality of deductible
    JEL: D80 D81
    Date: 2015–09
  8. By: Grigoreva, Diana; Bobojonov, Ihtiyor; Aw-Hassan, Aden; Biradar, Chandrashekar; Nurbekov, Aziz
    Abstract: This study investigates suitable several indexes, as well as risk coping potential of index-based insurance in Central Asia. This study discusses the challenges of index selection for irrigated systems and compares the results with rainfed systems. For this purpose, suitability and impact of area-yield, irrigation water intake at regional level, as well as remote sensing based indexes are analyzed. The results of the study show that selection of index for the irrigated systems is more complex than rainfed systems and more caution is required in order to minimize the basis risk.
    Keywords: Risk management, crop insurance, weather Index-based insurance, climate risk, irrigation water, NDVI, crop yield, Central Asia, Agribusiness,
    Date: 2015
  9. By: Röhrig, Maren; Hardeweg, Bernd
    Abstract: Apple production is afflicted with various risks. As it is a permanent crop, apple producers are less flexible to react upon undesirable events. As a result, for a sustainable economic performance, the determination of efficient farming options, as a combination of the production system and risk management instruments (RMI), is crucial. Our investigation focuses on this choice problem utilizing stochastic dominance criteria, which apply to a wide range of risk preferences. Based on data for 134 apple producers operating in the two main production areas in Germany, we compare and determine efficient production options for the most common regional varieties. Furthermore, appropriate RMIs are identified using stochastic dominance criteria. In this context we investigate internal RMI (frost irrigation and hail nets) as well as external risk protection tools (insurance options). In Germany only a single insurance concept against hail is available, whereas insurance against late frosts is not at the apple growers’ disposal. As frost insurance exists in neighboring countries, we analyze the effect of the latter based on a hypothetic hail-frost insurance policy. Simulated net present values of a one hectare level serve as decision criterion, for which the associated cumulative probability distributions are evaluated according to first and second degree stochastic dominance criteria. In addition, we use SERF (Stochastic Efficiency with Respect to a Function) as it evaluates farming options for defined ranges of relative risk aversion and thus has a higher discriminative power. The results indicate that Red Prince is the most efficient option in the north and subsidized hail insurance with frost irrigation is superior to frost irrigation as single RMI. In the south Braeburn should be chosen under rational aspects, but the tested insurance solutions are not as efficient as the common production practice under hail nets.
    Keywords: crop insurance, risk perception, risk behavior, risk management, SERF, Farm Management, Risk and Uncertainty,
    Date: 2015
  10. By: Nagler P. (UNU-MERIT)
    Abstract: The introduction of unemployment insurance savings accounts UISA in Chile in October 2002 led to more comprehensive unemployment protection while decreasing the opportunity cost of job change. Using a difference-in-differences approach this paper examines whether the introduction of UISA had an impact on the dierences in subsequent wages and contract types of i workers changing into a new employment, and ii workers experiencing a period of unemployment before re-entering the labour market. The analysis uses longitudinal social protection data and is the first to empirically investigate the effect of UISA on subsequent employment quality. The findings suggest that the introduction of the UISA scheme had a small negative effect on the wage difference of formal private sector workers, but no effect on contract types. Using informal private sector workers as a control group, only workers of the treatment group experiencing a period of unemployment show statistically different and positive results in wage growth. The robustness analysis, using an alternative as if introductory date and a different control group, largely supports these findings. The paper therefore concludes that the effect of UISA affiliation on wage growth is slightly negative, but positive compared to a control group for workers experiencing a period of unemployment, leading to a marginally higher employment quality for this latter group.
    Keywords: Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Unemployment: Models, Duration, Incidence, and Job Search; Unemployment Insurance; Severance Pay; Plant Closings; Mobility, Unemployment, and Vacancies: Public Policy; Economywide Country Studies: Latin America; Caribbean;
    JEL: C21 C31 E24 J64 J65 J68 O54
    Date: 2015
  11. By: Seira Enrique; Castellanos Pascacio Sara Gabriela; Jiménez Hernández Diego J.
    Abstract: We study the bancarization of marginal borrowers using credit cards and document that this process is difficult: default risk is substantial, returns heterogeneous, and account closings common. We also take advantage of a randomized control trial that varied interest rates and minimum payments in a very wide range. Against our hypothesis, we find that default risk is very insensitive to (randomized) large changes in interest rates and minimum payments. This could imply that regulating these contract terms may not necessarily "protect" consumers against default and that moral hazard in this market is negligible on average.
    Keywords: Credit cards; Development finance; Consumer behavior; Mexico.
    JEL: D14 D18 D82 G21
    Date: 2015–06
  12. By: Pinkovskiy, Maxim L. (Federal Reserve Bank of New York)
    Abstract: I consider changes in labor markets across U.S. states and counties around the enactment of the Affordable Care Act in 2010 and its implementation in 2014. I find that counties with large fractions of uninsured (and therefore a large exposure to the ACA) before the enactment or the implementation of the ACA experienced more rapid employment and salary growth than did counties with smaller fractions of people uninsured, both after the implementation of the ACA and after its enactment. I also find that the growth of the fraction of employees in states with larger uninsurance rates was not substantially higher than it was in states with smaller uninsurance rates. These findings are not accounted for by differential rates of recovery from the Great Recession in high- and low-uninsurance areas.
    Keywords: labor economics; health economics
    JEL: I13 I18
    Date: 2015–10–01
  13. By: Luca Lorenzoni; David Morgan; Yuki Murakami; Chris James
    Abstract: In recent years, China has seen an unprecedented expansion of health insurance for its population in its quest to achieve universal health coverage. By 2011, 95% of the Chinese population was insured up from less than 50% in 2005 through public or employer-based insurance schemes. As part of this move, the structure of health care financing has shifted significantly, such that public sources in 2013 funded well over half of all health spending, compared with just over a third in the early 2000s. In that context, it is important to determine the main drivers of future growth in health spending in the medium term, to assess the possible impact on public budgets. Using a component-based health expenditure model developed at the OECD, future projections of public spending on health care and long-term care are made for OECD and key emerging economies, including China. The uniform cross-country framework allows for consistent international comparisons under different cost-pressure and cost-containment scenarios.<BR>Ces dernières années, la Chine a connu une expansion sans précédent de la population couverte par l’assurance maladie dans sa quête pour une assurance maladie universelle. Dès 2011, 95% de la population chinoise était assurée contre moins de 50 % en 2005 par le biais de l’assurance maladie publique. Dans cette même mouvance, la structure du financement des soins de santé s'est déplacée de manière significative, au point que plus de la moitié des dépenses de santé est financée publiquement en 2013, contre un peu plus d'un tiers au début des années 2000. Dans ce contexte, il est important de déterminer les principaux moteurs de la croissance future des dépenses de santé à moyen terme, afin d'évaluer l'impact possible sur les budgets publics. En utilisant un modèle component-based des dépenses de santé développé à l'OCDE, des projections de la dépense publique en soins de santé et de longue durée, ont été réalisées pour les pays de l’OCDE et quelques pays émergents, incluant la Chine. L’utilisation d’une méthodologie unique pour l’ensemble des pays permet des comparaisons internationales cohérentes, avec différents scénarios de tension sur les coûts et de maitrise des coûts.
    JEL: H51 I12 J11
    Date: 2015–10–12
  14. By: Bütikofer, A.;; Skira, M.;
    Abstract: How does medical innovation affect labor supply? We analyze how the availability of Cox-2 inhibitors, pharmaceuticals used for treating pain and inflammation, affected the sickness absence and disability pension receipt of individuals with joint pain. We exploit the market entry of the Cox-2 inhibitor Vioxx and its sudden market withdrawal as exogenous sources of variation in drug use. Using Norwegian administrative data, we find Vioxx's entry decreased quarterly sickness absence days among individuals with joint pain by 7-11 percent. The withdrawal increased sickness days by 12-21 percent and increased the quarterly probability of receiving disabilitybenefits by 0.4-0.6 percentage points.
    Date: 2015–09
  15. By: Dietrich Domanski; Hyun Song Shin; Vladyslav Sushko
    Abstract: Long-term interest rates in Europe fell sharply in 2014 to historically low levels. This development is often attributed to yield-chasing in anticipation of quantitative easing (QE) by the European Central Bank (ECB). We examine how portfolio adjustments by long-term investors aimed at containing duration mismatches may have acted as an amplification mechanism in this process. Declining long-term interest rates tend to widen the negative duration gap between the assets and liabilities of insurers and pension funds, and any attempted rebalancing by increasing asset duration results in further downward pressure on interest rates. Evidence from the German insurance sector is consistent with such an amplification mechanism.
    Keywords: long-term yield compression, insurance sector, liability-driven investment, duration mismatch
    Date: 2015–10

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