nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒03‒17
seven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Risk-type and preference-based selection and stability of funeral insurance associations in Thailand By Tabea Herrmann; Juliane Zenker
  2. Turks and Caicos Islands: Financial Sector Assessment Program - Financial System Stability Assessment By International Monetary Fund
  3. Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement Error-Corrected Regression Discontinuity Approach By Steven Dieterle; Otavio Bartalotti; Quentin Brummet
  4. Social long-term care insurance with two-sided altruism By CREMER, B.; PESTIEAU, P.; ROEDER, K.
  5. Assessing the Effects of Disability Insurance Experience Rating: The Case of the Netherlands By De Groot, Nynke; Koning, Pierre
  6. "Has the Increased Attachment of Women to the Labor Market Changed a Family's Ability to Smooth Income Shocks?" By Olga Gorbachev
  7. Medical savings accounts: assessing their impact on efficiency, equity, and financial protection in health care By Olivier J. Wouters; Jonathan Cylus; Wei Yang; Sarah Thomson; Martin McKee

  1. By: Tabea Herrmann (University of Hannover); Juliane Zenker (University of Göttingen)
    Abstract: Funeral Aid Associations (FAAs) in Northeast Thailand offer micro funeral insurance at affordable premium levels while they barely risk-rate potential members. Due to the set-up of FAAs, high-risk individuals have a monetary incentive to join the insurance. Compared to many other micro insurance schemes, however, FAAs do not seem to face adverse effects of this unregulated selection of highrisk individuals into the schemes. We show that this is partly due to a counter-balancing selection of a sufficient number of low-risk individuals, who deliberately buy insurance despite what their risk types would advice. This is particularly the case for married individuals who self-select into the associations at relatively lower risks. We provide a theoretical framework showing that marriage may reduce mortality risk and at the same time increase insurance demand based on altruistic tendencies towards the spouse. Our results suggest that this preference based selection is able to balance 13 percent of the high-risk type selection based on age, health, and gender.
    Keywords: Asymmetric Information; Adverse Selection; Advantageous Selection; Microinsurance; Thailand
    JEL: D14 D82 G22 O12
    Date: 2016–02–28
  2. By: International Monetary Fund
    Abstract: This paper discusses key findings and recommendations made in Financial System Stability Assessment for Turks and Caicos Islands. Although the financial oversight framework has significantly improved, the Financial Services Commission (FSC) should strive for further progress. Major advances have been made regarding the operational independence of the FSC and staffing. Nonetheless, the outdated Banking Ordinance and Insurance Ordinance need urgent overhaul. The functioning of the FSC should be strengthened by enhancing Board oversight, filling key positions at Board and senior management levels, strengthening communication and consultation with the industry, and improving the supervision and risk assessment capacities of FSC staff.
    Keywords: Turks and Caicos Islands;bank, banks, insurance, risk, services
    Date: 2015–10–14
  3. By: Steven Dieterle; Otavio Bartalotti; Quentin Brummet
    Abstract: The extension of Unemployment Insurance (UI) benefits was a key policy response to the Great Recession. However, these benefit extensions may have had detrimental labor market effects. While evidence on the individual labor supply response indicates small effects on unemployment, recent work by Hagedorn et al. (2015) uses a county border pair identification strategy to find that the total effects inclusive of effects on labor demand are substantially larger. By focusing on variation within border county pairs, this identification strategy requires counties in the pairs to be similar in terms of unobservable factors. We explore this assumption using an alternative regression discontinuity approach that controls for changes in unobservables by distance to the border. To do so, we must account for measurement error induced by using county-level aggregates. These new results provide no evidence of a large change in unemployment induced by differences in UI generosity across state boundaries. Further analysis suggests that individuals respond to UI benefit differences across boundaries by targeting job search in high-benefit states, thereby raising concerns of treatment spillovers in this setting. Taken together, these two results suggest that the effect of UI benefit extensions on unemployment remains an open question.
    Date: 2016–02–26
  4. By: CREMER, B. (Toulouse School of Ecoomics); PESTIEAU, P. (3CREPP, Université de Liège; CORE, Université catholique de Louvain, and Toulouse School of Ecoomics); ROEDER, K. (University of Augsburg)
    Abstract: This paper studies the design of a social long-term care (LTC) insurance when altruism is two-sided. The laissez-faire solution is not efficient, unless there is perfect altruism. Under full information, the first-best can be decentralized by a linear subsidy on informal aid, a linear tax on bequests when the parent is dependent and state specific lump-sum transfers which provide insurance. We also study a second-best scheme comprising a LTC benefit, a payroll tax on children’s earnings and an inheritance tax. This scheme redistributes resources across individuals and between the states of nature and the tax on children’s labor enhances informal care to compensate for the children’s possible less than full altruism.
    Keywords: long-term care, social insurance, two-sided altruism
    JEL: H2 H5
    Date: 2015–10–21
  5. By: De Groot, Nynke (Free University Amsterdam); Koning, Pierre (Vrije Universiteit Amsterdam)
    Abstract: Experience rated Disability Insurance (DI) premiums are often advocated as a means to stimulate firms to reduce DI inflow and increase DI outflow. To assess the size of these intended effects of experience rating, this study provides an empirical analysis of the effects of DI experience rating in the Netherlands. We use a difference-in-difference approach with administrative matched firm and worker data that exploits the removal of experience rating for small firms in 2003 and 2004. According to our results, removing experience rating caused an increase of DI inflow of about 7% for small firms, while DI outflow decreased by 12% as a result of the reform. We argue that these effects were largely confined to the sickness period that preceded the DI claims assessment, as well as the first year of DI benefit receipt.
    Keywords: disability insurance, experience rating, differences-in-differences
    JEL: H22 I12 C23
    Date: 2016–02
  6. By: Olga Gorbachev (Department of Economics, University of Delaware)
    Abstract: An increase in a married woman's attachment to the labor market affected her family's ability to smooth unexpected income shocks. Between 1970 and 1990, the sharp rise in labor market attachment provided an increasingly important channel for smoothing shocks to spousal income. As the participation rate stabilized, this contribution to smoothing evened out. In the Great Recession, both spouses received negative income shocks, and access to transfer income became the main insurance mechanism. Volatility of consumption followed volatility of family income trends but at a lower magnitude. Families ability to weather income shocks didn't change during the 1970-2010 period.
    Keywords: volatility, welfare, intra-household insurance
    JEL: D12 J22
    Date: 2016
  7. By: Olivier J. Wouters; Jonathan Cylus; Wei Yang; Sarah Thomson; Martin McKee
    Abstract: Medical savings accounts (MSAs) allow enrolees to withdraw money from earmarked funds to pay for health care. The accounts are usually accompanied by out-of-pocket payments and a high-deductible insurance plan. This article reviews the association of MSAs with efficiency, equity, and financial protection. We draw on evidence from four countries where MSAs play a significant role in the financing of health care: China, Singapore, South Africa, and the United States of America. The available evidence suggests that MSA schemes have generally been inefficient and inequitable and have not provided adequate financial protection. The impact of these schemes on long-term health-care costs is unclear. Policymakers and others proposing the expansion of MSAs should make explicit what they seek to achieve given the shortcomings of the accounts.
    JEL: J1
    Date: 2016–02–17

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