nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒01‒29
ten papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Social Insurance, Private Health Insurance and Individual Welfare By Kai Zhao
  2. Racial Difference in the Use of VA Health Services By Chichun Fang; Kenneth Langa; Helen Levy; David Weir
  3. Solvency risk minimizing guaranteed returns in life insurance By Szüle, Borbála
  4. Computing semiparametric bounds on the expected payments of insurance instruments via column generation By Robert Howley; Robert Storer; Juan Vera; Luis F. Zuluaga
  5. On households and unemployment insurance By Valladares-Esteban, Arnau; Choi, Sekyu
  6. Surfing through the GFC: systemic risk in Australia By Dungey, Mardi; Luciani, Matteo; Matei, Marius; Veredas, David
  7. Absenteeism and productivity: the experience rating applied to employer contributions to health insurance By Sébastien Ménard; Coralia Quintero Rojas
  8. On bivariate lifetime modelling in life insurance applications By Fran\c{c}ois Dufresne; Enkelejd Hashorva; Gildas Ratovomirija; Youssouf Toukourou
  9. Crunching Mortality and Annuity Portfolios with extended CreditRisk+ By Jonas Hirz; Uwe Schmock; Pavel V. Shevchenko
  10. Trends in Disability and Program Participation Among U.S. Veterans By Yonatan Ben-Shalom; Jennifer R. Tennant; David C. Stapleton

  1. By: Kai Zhao (University of Connecticut)
    Abstract: This paper studies the impact of social insurance on private insurance and individualwelfare in a dynamic general equilibrium model with uncertain medical expenses and individual health insurance choices. I find that social insurance (modeled as a combination of the minimum consumption floor and the Medicaid program) crowds out private health insurance coverage, and this crowd-out is important for understanding the welfare consequences of social insurance. When the crowding out effect on private insurance is taken into account, the welfare gain from social insurance becomes substantially smaller and under some certain conditions it becomes a welfare loss. The intuition for these results is that the crowding out effect partially offsets the insurance benefits provided by social insurance. The findings of the paper suggest that it is important to consider the endogenous responses on private insurance choices when examining any social insurance policy reform. They also imply that the existence of social insurance programs may be one reason why some Americans do not buy any health insurance.
    Keywords: Saving, Uncertain Medical Expenses, Health Insurance, Means Testing
    JEL: E20 E60 H30 I13
    Date: 2016–01
  2. By: Chichun Fang (University of Michigan); Kenneth Langa (University of Michigan); Helen Levy (University of Michigan); David Weir (University of Michigan)
    Abstract: We study the factors that affect the utilization of health care services administered by the Department of Veterans Affairs (VA) and its racial differences. Due to data limitation, previous research in this regard mostly only focuses on veterans who are VA users or at least eligible for VA services. We fill in the gap in literature with a random sample of veterans 51 and older from the Health and Retirement Study. We find that, among all veterans, those who are black and less healthy are more likely to use VA health services. These factors, nevertheless, are no longer statistically significant after the sample is restricted to veterans who are eligible for VA services. We also find that VA health services and services provided through other channels are at least partial substitutes: VA usage drops when a veteran becomes age eligible for Medicare or when a veteran has health insurance coverage through employment. This drop in usage holds not only among all veterans, but also among veterans eligible for VA services. Finally, perception about the quality of services delivered in VA versus non-VA facilities strongly predicts VA services usage. Those who have favorable views toward VA use VA services more, and the results from variance decomposition suggests a majority part of the racial difference in VA usage can be attributed to the racial difference in such perception.
    Date: 2015–09
  3. By: Szüle, Borbála
    Abstract: Return guarantee constitutes a key ingredient of classical life insurance premium calculation. In the current low interest rate environment insurers face increasingly strong financial incentives to reduce guaranteed returns embedded in life insurance contracts. However, return guarantee lowering efforts are restrained by associated demand effects, since a higher guaranteed return makes the net price of the insurance cover lower. This tradeoff between possibly higher future insurance obligations and the possibility of a larger demand for life insurance products can theoretically also be considered when determining optimal guaranteed returns. In this paper, optimality of return guarantee levels is analyzed from a solvency point of view. Availability and some other properties of optimal solutions for guaranteed returns are explored and compared in a simple model for two measures of solvency risk (company-level and contract-level VaR). The paper concludes that a solvency risk minimizing optimal guaranteed return may theoretically exist, although its practical availability can be impeded by economic and regulatory constraints.
    Keywords: risk analysis, insurance
    JEL: G11 G22
    Date: 2016–01
  4. By: Robert Howley; Robert Storer; Juan Vera; Luis F. Zuluaga
    Abstract: It has been recently shown that numerical semiparametric bounds on the expected payoff of fi- nancial or actuarial instruments can be computed using semidefinite programming. However, this approach has practical limitations. Here we use column generation, a classical optimization technique, to address these limitations. From column generation, it follows that practical univari- ate semiparametric bounds can be found by solving a series of linear programs. In addition to moment information, the column generation approach allows the inclusion of extra information about the random variable; for instance, unimodality and continuity, as well as the construction of corresponding worst/best-case distributions in a simple way.
    Date: 2016–01
  5. By: Valladares-Esteban, Arnau; Choi, Sekyu
    Date: 2016–01–18
  6. By: Dungey, Mardi (Tasmanian School of Business & Economics, University of Tasmania); Luciani, Matteo (ECARES, Universite libre de Bruxelles); Matei, Marius (Tasmanian School of Business & Economics, University of Tasmania); Veredas, David (ECARES, Universite libre de Bruxelles)
    Abstract: We provide empirical evidence on the degree of systemic risk in Australia before, during and after the Global Financial Crisis. We calculate a daily index of systemic risk from 2004 to 2013 in order to understand how real economy firms influence the outcomes for the rest of the economy. This is done via a mapping of the interconnectedness of the financial and non-financial sectors. The financial sector is in general the home to the most consistently systemically risky firms in the economy. The mining sector becomes occasionally as systemically risky as the financial sector, reflecting the importance of understanding the interrelationships between the financial sector and the real economy in monitoring systemic risks.
    Keywords: banking, insurance, systemic risk
    JEL: G22 G21 G01 G28
    Date: 2015–04–22
  7. By: Sébastien Ménard; Coralia Quintero Rojas
    Date: 2015
  8. By: Fran\c{c}ois Dufresne; Enkelejd Hashorva; Gildas Ratovomirija; Youssouf Toukourou
    Abstract: Insurance and annuity products covering several lives require the modelling of the joint distribution of future lifetimes. In the interest of simplifying calculations, it is common in practice to assume that the future lifetimes among a group of people are independent. However, extensive research over the past decades suggests otherwise. In this paper, a copula approach is used to model the dependence between lifetimes within a married couple \eH{using data from a large Canadian insurance company}. As a novelty, the age difference and the \eH{gender} of the elder partner are introduced as an argument of the dependence parameter. \green{Maximum likelihood techniques are} thus implemented for the parameter estimation. Not only do the results make clear that the correlation decreases with age difference, but also the dependence between the lifetimes is higher when husband is older than wife. A goodness-of-fit procedure is applied in order to assess the validity of the model. Finally, considering several products available on the life insurance market, the paper concludes with practical illustrations.
    Date: 2016–01
  9. By: Jonas Hirz; Uwe Schmock; Pavel V. Shevchenko
    Abstract: In this paper we describe a useful risk management tool to analyse annuity and life insurance portfolios where mortality is modelled stochastically. Yet, there exists a fast and numerically stable algorithm to derive loss distributions exactly, even for large portfolios. We provide various estimation procedures based on publicly available data. The model allows for various other applications, including mortality forecasts. Compared to the Lee-Carter model, we have a more flexible framework, get tighter bounds and can directly extract several sources of uncertainty. Straight-forward model validation techniques are available.
    Date: 2016–01
  10. By: Yonatan Ben-Shalom; Jennifer R. Tennant; David C. Stapleton
    Abstract: Older veterans are facing increasing challenges in the labor market, and further research is needed to determine whether these challenges are primarily related to health, a growing skills gap, or poorly-aligned incentives.
    Keywords: Disability Benefits, Veterans, Department of Veterans Affairs, Social Security Administration, Cognitive Disability
    JEL: I J
    Date: 2016–01–06

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