nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒05‒28
seventeen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Measuring Interest Rate Risk in the Life Insurance Sector: The U.S. and the U.K. By Hartley, Daniel; Paulson, Anna L.; Rosen, Richard J.
  2. A stochastic forward-looking model to assess the profitability and solvency of European insurers By Berdin, Elia; Pancaro, Cosimo; Kok Sørensen, Christoffer
  3. Balancing Access and Costs: Health Benefit Structures for Privately Insured People By James D. Reschovsky; Kara Contreary; Joel V. Smith
  4. The Fiscal Cost of Hurricanes: Disaster Aid Versus Social Insurance By Tatyana Deryugina
  5. The Effect of the Patient Protection and Affordable Care Act Medicaid Expansions on Financial Well-Being By Luojia Hu; Robert Kaestner; Bhashkar Mazumder; Sarah Miller; Ashley Wong
  6. Recap of US Crop Insurance Industry Gains and Losses By Borman, Julia; Vergara, Oscar; Sasanian, Sid; Ward, Katie
  7. The Case for Public Investment in Stay-at-Work/Return-to-Work Programs By Yonatan Ben-Shalom; Hannah Burak
  8. Deposit Insurance: Theories and Facts By Charles W. Calomiris; Matthew Jaremski
  9. Encouragement Emails Increase Participation in Reemployment Services By Matthew Darling; Christopher O'Leary; Irma Perez-Johnson; Jaclyn Lefkowitz; Ken Kline; Ben Damerow; Randall Eberts
  10. Reaching Out to Enroll Children in Public Health Insurance: The CKF Grantees and Their Experiences By Embry Howell; Brigette Courtot
  11. Let’s talk about the weather: the impact of climate change on central banks By Batten,, Sandra; Sowerbutts, Rhiannon; Tanaka, Misa
  12. Private Health Insurance Premiums and Federal Policy By Congressional Budget Office
  13. Seasonal Climate Forecasts and Agricultural Risk Management: Implications for Insurance Design By Miguel A. Carriquiry; Walter E. Baethgen
  14. Interpreting Recent Quasi-Experimental Evidence on the Effects of Unemployment Benefit Extensions By Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt
  15. Unemployment Insurance and the Duration of Employment: Evidence from a Regression Kink Design By D. G. C. Britto
  16. How does Insurance affect the Price of Drugs: A Graphical Analysis By Audrey Laporte; Brian Ferguson
  17. Evaluation of the Health Care Innovation Awards (HCIA): Primary Care Redesign Programs, Second Annual Report Volume II By Emily Ehrlich; Andrea Wysocki; KeriAnn Wells; Boyd Gilman; Greg Peterson; Catherine DesRoches; Sandi Nelson; Laura Blue; Keith Kranker; Kate Stewart; Frank Yoon; Jelena Zurovac; Lorenzo Moreno

  1. By: Hartley, Daniel (Federal Reserve Bank of Chicago); Paulson, Anna L. (Federal Reserve Bank of Chicago); Rosen, Richard J. (Federal Reserve Bank of Chicago)
    Abstract: We use a two factor model of life insurer stock returns to measure interest rate risk at U.S. and U.K. insurers. Our estimates show that interest rate risk among U.S. life insurers increased as interest rates decreased to historically low levels in recent years. For life insurers in the U.K., in contrast, interest rate risk remained low during this time, roughly unchanged from what it was in the period prior to the financial crisis when long-term interest rates were in their usual historical ranges. We attribute these differences to the heavier use of products that combine guarantees with options for policyholders to adjust their behavior by U.S. life insurers relative to their U.K. counterparts.
    Keywords: Insurance companies; Interest rate risk; Life insurance; Low interest rates
    JEL: E43 G22 I13
    Date: 2016–01–03
  2. By: Berdin, Elia; Pancaro, Cosimo; Kok Sørensen, Christoffer
    Abstract: In this paper, we develop an analytical framework for conducting forward-looking assessments of profitability and solvency of the main euro area insurance sectors. We model the balance sheet of an insurance company encompassing both life and non-life business and we calibrate it using country level data to make it representative of the major euro area insurance markets. Then, we project this representative balance sheet forward under stochastic capital markets, stochastic mortality developments and stochastic claims. The model highlights the potential threats to insurers solvency and profitability stemming from a sustained period of low interest rates particularly in those markets which are largely exposed to reinvestment risks due to the relatively high guarantees and generous profit participation schemes. The model also proves how the resilience of insurers to adverse financial developments heavily depends on the diversification of their business mix. Finally, the model identifies potential negative spillovers between life and non-life business thorugh the redistribution of capital within groups.
    Keywords: Financial Stability,Insurance,Interest Rate Risk,Stress Test
    JEL: G20 G22 G23
    Date: 2016
  3. By: James D. Reschovsky; Kara Contreary; Joel V. Smith
    Abstract: Health insurance benefit structures, particularly cost-sharing amounts, can either encourage or discourage patients from seeking care. The goal is to strike the right balance so out-of-pocket costs don’t discourage people from getting needed care but do prompt them to consider costs before seeking discretionary care.
    Keywords: health benefit, privately insured people, access, costs
    JEL: I
    Date: 2016–03–31
  4. By: Tatyana Deryugina
    Abstract: Little is known about the fiscal costs of natural disasters, especially regarding social safety nets that do not specifically target extreme weather events. This paper shows that US hurricanes lead to substantial increases in non-disaster government transfers, such as unemployment insurance and public medical payments, in affected counties in the decade after a hurricane. The present value of this increase significantly exceeds that of direct disaster aid. This implies, among other things, that the fiscal costs of natural disasters have been significantly underestimated and that victims in developed countries are better insured against them than previously thought.
    JEL: H53 H84 Q54
    Date: 2016–05
  5. By: Luojia Hu; Robert Kaestner; Bhashkar Mazumder; Sarah Miller; Ashley Wong
    Abstract: We examine the effect of the Medicaid expansions under the 2010 Patient Protection and Affordable Care Act (ACA) on financial outcomes using credit report data for a large sample of individuals. We employ the synthetic control method (Abadie et al., 2010) to compare individuals living in states that expanded Medicaid to those that did not. We find that the Medicaid expansions significantly reduced the number of unpaid bills and the amount of debt sent to third-party collection agencies among those residing in zip codes with the highest share of low income, uninsured individuals. Our estimates imply a reduction in collection balances of around $600 to $1,000 among those who gain Medicaid coverage due to the ACA. Our findings suggest that the ACA Medicaid expansions had important financial impacts beyond health care use.
    JEL: H20 I13 I38
    Date: 2016–04
  6. By: Borman, Julia; Vergara, Oscar; Sasanian, Sid; Ward, Katie
    Keywords: Agricultural and Food Policy,
    Date: 2016–03
  7. By: Yonatan Ben-Shalom; Hannah Burak
    Abstract: Millions of hard-working Americans leave the labor force every year, at least temporarily, because of injury or illness. Without steady earnings, these workers and their families often end up in public programs such as Social Security Disability Insurance, Supplemental Security Income, Medicare, and Medicaid.
    Keywords: labor, work force, Social Security Disability Insurance, SSDI, Supplemental Security Income, SSI
    JEL: I J
    Date: 2016–03–01
  8. By: Charles W. Calomiris; Matthew Jaremski
    Abstract: Economic theories posit that bank liability insurance is designed as serving the public interest by mitigating systemic risk in the banking system through liquidity risk reduction. Political theories see liability insurance as serving the private interests of banks, bank borrowers, and depositors, potentially at the expense of the public interest. Empirical evidence – both historical and contemporary – supports the private-interest approach as liability insurance generally has been associated with increases, rather than decreases, in systemic risk. Exceptions to this rule are rare, and reflect design features that prevent moral hazard and adverse selection. Prudential regulation of insured banks has generally not been a very effective tool in limiting the systemic risk increases associated with liability insurance. This likely reflects purposeful failures in regulation; if liability insurance is motivated by private interests, then there would be little point to removing the subsidies it creates through strict regulation. That same logic explains why more effective policies for addressing systemic risk are not employed in place of liability insurance. The politics of liability insurance also should not be construed narrowly to encompass only the vested interests of bankers. Indeed, in many countries, it has been installed as a pass-through subsidy targeted to particular classes of bank borrowers.
    JEL: E44 G21 G28
    Date: 2016–05
  9. By: Matthew Darling; Christopher O'Leary; Irma Perez-Johnson; Jaclyn Lefkowitz; Ken Kline; Ben Damerow; Randall Eberts
    Abstract: This brief presents findings on the effects of an intervention designed to encourage Unemployment Insurance (UI) claimants to participate in their state’s Reemployment and Eligibility Assessment pilot program and persist in their job search.
    Keywords: labor, nudge, employment, worker, employee, unemployment, insurance, behavioral, intervention
    JEL: J
  10. By: Embry Howell; Brigette Courtot
    Keywords: Covering Kids & Families Evaluation, SCHIP, Medicaid, Public Health, insurance
    JEL: I
  11. By: Batten,, Sandra (Bank of England); Sowerbutts, Rhiannon (Bank of England); Tanaka, Misa (Bank of England)
    Abstract: This paper examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives. We argue that two types of risks are particularly relevant for central banks. First, a weather-related natural disaster could trigger financial and macroeconomic instability if it severely damages the balance sheets of households, corporates, banks, and insurers (physical risks). Second, a sudden, unexpected tightening of carbon emission policies could lead to a disorderly re-pricing of carbon-intensive assets and a negative supply shock (transition risks). Climate-related disclosure could facilitate an orderly transition to a low-carbon economy if it helps a wide range of investors better assess their financial risk exposures.
    Keywords: Climate change; natural disasters; financial stability; monetary policy;
    JEL: E58 G21 G22 Q43 Q54
    Date: 2016–05–20
  12. By: Congressional Budget Office
    Abstract: Premiums for private health insurance, which are high and rising, are affected by various federal subsidies and regulations. In 2016, the federal government will subsidize most premiums, at a cost of roughly $300 billion.
    JEL: I13 I18
    Date: 2016–02–11
  13. By: Miguel A. Carriquiry (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Walter E. Baethgen (International Research Institute for Climate and Society, The Earth Institute at Columbia University (United States))
    Abstract: Seasonal climate forecasts and insurance are two instruments with potential to help manage risks in agricultural production. While both instruments play a distinct role in practice, they interact among themselves and with other production decisions. In particular, we contend that the progress in climate science in providing increasingly accurate seasonal forecasts has implications for the design of agricultural insurance. Early information regarding likely growing conditions will result in shifts in the expected distribution of crop yields, and the payouts associated with an insurance contract. The magnitude of these effects is illustrated using a combination of crop simulation models, and Monte Carlo techniques.
    Keywords: Agricultural risk; Index insurance, Insurance, Seasonal climate forecast
    JEL: Q1 G22 Q54
    Date: 2016–04
  14. By: Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt
    Abstract: We critically review recent methodological and empirical contributions aiming to provide a comprehensive assessment of the effects of unemployment benefit extensions on the labor market and attempt to reconcile their apparently disparate findings. We describe two key challenges facing these studies - the endogeneity of benefit durations to labor market conditions and isolating true effects of actual policies from agents' responses to expectations of future policy changes. Marinescu (2015) employs a methodology that does not attempt to address these challenges. A more innovative approach in Coglianese (2015) and Chodorow-Reich and Karabarbounis (2016) attempts to overcome these challenges by exploiting a sampling error in unemployment rates as an exogenous variation. Unfortunately, we find that this approach falls prey to the very problems it aims to overcome and it appears unlikely that the fundamental bias at the core of this approach can be overcome. We find more promising the approach based on unexpected policy changes as in the recent contributions by Johnston and Mas (2015) and Hagedorn, Manovskii and Mitman (2015). This approach by design addresses the problem of benefit endogeneity. It does not, however, fully address the effects of expectations and generally yields a lower bound on the actual effects of policies.
    Keywords: Unemployment; Unemployment insurance
    JEL: E24 J63 J64 J65
    Date: 2016–05
  15. By: D. G. C. Britto
    Abstract: Can the potential availability of unemployment insurance (UI) affect the behavior of employed workers and the duration of their employment spells? I apply a regression kink design (RKD) to address this question using linked employer-employee data from the Brazilian labor market. Exploiting the UI schedule, I find 1% higher potential benefit level increases job duration by around 0.3%. Such result is driven by the fact that higher UI decreases the probability of job quits, which are not covered by UI in Brazil. These estimates are robust to permutation tests and a number of falsification tests. I develop a simple model to assess the economic relevance of this finding. It shows that the positive effect on employment duration implies that the optimal benefit level is higher than otherwise. More importantly, the model delivers a simple welfare formula based on sufficient statistics which can be easily linked to the data. A simple calibration exercise shows that this elasticity impacts welfare with a similar magnitude to the well-known elasticity of unemployment duration to benefit level.
    JEL: I38 J65
    Date: 2016–02
  16. By: Audrey Laporte; Brian Ferguson
    Abstract: Prices of drugs differ greatly across countries and to a certain degree across payment agencies within countries (OECD (2015)). It is well known among health economists that the presence of insurance creates a separation between the consumer of pharmaceuticals and the payer. This separation can result in the price of drugs being driven up simply because somebody other than the consumer is responsible for paying for them. The precise impact of insurance on drug prices however, will depend critically on the structure of the insurance, a fact that has tended to get lost in health policy debate. The purpose of this paper is to use diagrammatic analysis of three types of insurance: co-insurance, reference pricing and co-payment, to investigate how each affects the price of prescription drugs. In addition, we analyze the role of a new pricing tool, which has recently been increasingly used by pharmaceutical companies in North America: co-Payment waiver coupons. Among other policy implications, we suggest that the use of co-pay waivers turns the co-payment insurance constraint into something similar to the reference pricing constraint, from the supplier's perspective, but with greater transactions costs.
    Keywords: drug pricing, insurance, pharmaceuticals, co-payment, reference pricing, co-insurance
    Date: 2016–05
  17. By: Emily Ehrlich; Andrea Wysocki; KeriAnn Wells; Boyd Gilman; Greg Peterson; Catherine DesRoches; Sandi Nelson; Laura Blue; Keith Kranker; Kate Stewart; Frank Yoon; Jelena Zurovac; Lorenzo Moreno
    Abstract: Individual program summaries.
    Keywords: Primary Care Redesign, Implementation Evaluation, Impact Evaluation, Delivery Systems Innovation, Clinician Behavior, Workforce Development, Medicare, Medicaid
    JEL: I

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