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on Insurance Economics |
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Issue of 2016‒07‒23
fifteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Svetlana Pashchenko (University of Surrey); Ponpoje Porapakkarm (National Graduate Institute for Policy Studies) |
| Abstract: | Should asset testing be used in means-tested programs? These programs target low-income people, but low income can result not only from low productivity but also from low labor supply. We aim to show that in the asymmetric information environment, there is a positive role for asset testing. We focus on Medicaid, one of the largest means-tested programs in the US, and we ask two questions: 1) Does Medicaid distort work incentives? 2) Can asset testing improve the insurance-incentives trade-off of Medicaid? Our tool is a general equilibrium model with heterogeneous agents that matches many important features of the data. We find that 23% of Medicaid enrollees do not work in order to be eligible. These distortions are costly: if individuals' productivity was observable and could be used to determine Medicaid eligibility, this results in substantial ex-ante welfare gains. When productivity is unobservable, asset testing is effective in eliminating labor supply distortions, but to minimize saving distortions, asset limits should be different for workers and non-workers. This work-dependent asset testing can produce welfare gains close to the case of observable productivity. |
| Keywords: | means-tested programs, health insurance, Medicaid, asset testing, general equilibrium, life-cycle model |
| JEL: | D52 D91 E21 H53 I13 I18 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2016-016&r=ias |
| By: | Heenkenda, Shirantha |
| Abstract: | The main objective of this study is to explore the feasibility of farmers’ organizations (FOs) as a vehicle for microinsurance delivery for paddy crop cultivated by small-scale (peasant) farmers in Sri Lanka. Ampara district, on Sri Lanka’s eastern plain was selected to conduct the field survey. Factor Analysis is used to elicit the group dynamic and capacity of FOs as a stakeholder of the insurance supply chain. The results show that the farmers’ organization is most widespread and very close institutional setup for paddy farmers. FOs are capable of handling financial activities with transparency, and have healthy financial habits and those farmers participate actively in farmers’ organization activities. This study provided clear policy insights into the design of institutions channel that foster cooperation, and of the characteristics of FOs. To assist in the FOs financial activities, the postal network can act as financial intermediaries in circumstances where the commercial insurers do not have an outlet or branch networks in their target area. For developing the linkages between farmers and insurers, the public-private partnership model can be used for microinsurance supply to paddy farmers in Sri Lanka. In this context, multi-stakeholder partnerships should be made imperative for paddy farmers’ insurance delivery aimed at widespread coverage or large-scale implementation. |
| Keywords: | Farmers’ Organizations, Financial Intermediaries, Insurance Delivery, Microinsurance |
| JEL: | G2 G22 |
| Date: | 2016–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72480&r=ias |
| By: | Fatih Santas (Hacettepe University); Ahmet Kar (Hacettepe University); Gulcan Kahraman (Hacettepe University); Arzu Kursun (Giresun University) |
| Abstract: | Competition has increased among all health care providers in the provision of health care services in Turkey with the increasing role of the private sector. Perception management of health care consumers has gained importance. In order to be preferred by health care consumers, it is necessary for managers to determine how the perception of health care organizations. This study aims to determine the perception of health care consumers related to public, university and private hospitals. For this purpose, survey was applied to 283 patients who got health care services in outpatient services in a public hospital in Giresun in Turkey. The study shows that there is a statistically significant relationship between hospital preference of consumers and gender, age, income, health insurance and number of hospital visit last one year. The research demonstrates that consumers perceive private hospitals operating in the city center of Giresun on the first rank at the five dimensions (staff behavior, service quality, physical facilities, reputation and cost to consumer). |
| Keywords: | Health Care Marketing, Consumer, Perceptual Maps, Hospitals |
| JEL: | M00 I11 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:4006535&r=ias |
| By: | Nato Kakashvili (Ivane Javakhishvili Tbilisi State University) |
| Abstract: | Actuality. Organization of social security system serves the aim – Living and quality standards of population should be ensured by redistribution of national income, by realization of social solidarity principle for disabled and low income population. Deepening the problems of social security, usage different forms of protection system has made the issue about improving social security system as a central part of economic research. Usage of social insurance for compensation of losses received from social risks has not been fully formed in Georgia. Social insurance is an important element of the financial system, social security system of population and insurance industry, which brings together the interests of the citizens of any country. Its qualitative and quantitative characteristics create idea about social, economic, legal and cultural level of society. The object of the research is the social insurance system of Georgia, economically strong, democratic and legal state building perspective greatly depends on effective functioning of above mentioned system.The aim of the research. The aim of the research is studying of existing problems in social insurance system and ways of improvement. Research Methods. During the research, due to practical importance and complexity of the problem, it has been used systemic, historical and logical generalization methods. Also it has been used scientific abstraction, methods of analysis and synthesis.Conclusion. The findings and results from the survey will help to eliminate existing problems in social insurance system of Georgia and will raise efficiency. |
| Keywords: | insurance, insurer, social insurance, universal insurance. |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:4006554&r=ias |
| By: | Florian PELGRIN (EDHEC Business School); Pascal ST-AMOUR (University of Lausanne and Swiss Finance Institute) |
| Abstract: | Health insurance status can change over the life cycle for exogenous reasons (e.g. Medicare for the elders, PPACA for younger agents, termination of coverage at retirement in employer-provided plans). Durability of the health capital, endogenous mortality and morbidity, as well as backward induction suggests that these changes should affect the dynamic life cycle beyond the period at which they occur. The purpose of this paper is to study these lifetime effects on the optimal allocation (consumption, leisure, health expenditures), status (health, wealth and survival rates), and welfare. We analyse the impact of young (resp. old) insurance status conditional on old (resp. young) coverage through the structural estimation of a dynamic model with endogenous death and sickness risks. Our results show that young insurees are healthier, wealthier, consume more health care yet are less exposed to OOP risks, and substitute less (more) leisure before (after) retirement. Old insurees show similar patterns, except for lower precautionary wealth balances. Compulsory health insurance is unambiguously optimal for elders, and for young agents, except early in the life cycle. We draw other implications for public policy such as Medicare and PPACA. |
| Keywords: | Household Finance, Endogenous Morbidity and Mortality Risks, Demand for Health, Medicare and Patient Protection and Affordable Care Act, Simulated Moments Estimation |
| JEL: | D91 G11 I13 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1431&r=ias |
| By: | Krueger, Dirk (University of Pennsylvania); Mitman, Kurt (Stockholm University); Perri, Fabrizio (Federal Reserve Bank of Minneapolis) |
| Abstract: | How big are the welfare losses from severe economic downturns, such as the U.S. Great Recession? How are those losses distributed across the population? In this paper we answer these questions using a canonical business cycle model featuring household income and wealth heterogeneity that matches micro data from the Panel Study of Income Dynamics (PSID). We document how these losses are distributed across households and how they are affected by social insurance policies. We find that the welfare cost of losing one’s job in a severe recession ranges from 2% of lifetime consumption for the wealthiest households to 5% for low-wealth households. The cost increases to approximately 8% for low-wealth households if unemployment insurance benefits are cut from 50% to 10%. The fact that welfare losses fall with wealth, and that in our model (as in the data) a large fraction of households has very low wealth, implies that the impact of a severe recession, once aggregated across all households, is very significant (2.2% of lifetime consumption). We finally show that a more generous unemployment insurance system unequivocally helps low-wealth job losers, but hurts households that keep their job, even in a version of the model in which output is partly demand determined, and therefore unemployment insurance stabilizes aggregate demand and output. |
| Keywords: | Great Recession; Wealth inequality; Social insurance; Welfare loss from recessions |
| JEL: | E21 E32 J65 |
| Date: | 2016–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:532&r=ias |
| By: | Pau Milan |
| Abstract: | In this paper I investigate mutual insurance arrangements restricted on a social network. My approach solves for Pareto-optimal sharing rules in a situation where exchanges are limited within a given social network. I provide a formal description of the sharing rule between any pair of linked households as a function of their network position. I test the theory on a unique data set of indigenous villages in the Bolivian Amazon, during the years 2004 to 2009. I find that the observed exchanges across families match the network-based sharing rule, and that the theory can account for the deviation from full insurance observed in the data. I argue that this framework provides a reinterpretation of the standard risk sharing results, predicting household heterogeneity in response to income shocks. I show that this network-based variation in consumption behavior is borne out in the data, and that it can be interpreted economically in terms of consumption volatility. |
| JEL: | D12 D61 D85 O1 O12 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:912&r=ias |
| By: | Eric French (University College London) |
| Abstract: | The old age provisions of the Medicaid program were designed to insure re- tirees against medical expenses. We estimate a structural model of savings and medical spending and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across currently single retirees. Compensat- ing variation calculations indicate that current retirees value Medicaid insur- ance at more than its actuarial cost, but that most would value an expansion of the current Medicaid program at less than its cost. These findings suggest that for current single retirees, the Medicaid program may be of the approximately right size. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed016:155&r=ias |
| By: | Yasuhiro Sakai (Faculty of Economics, Shiga University) |
| Abstract: | The purpose of this paper is to intensively discuss and carefully compare the Liverpool Merchants of Britain and the Ohmi merchants of Japan in a historical perspective. The question of much interest is how and why those two merchants dealt with risk and insurance differently. In his later years, J.R. Hicks did a great contribution on the theory of economic history. He paid a special attention to the rise of the market in which the merchant played as the main actor of the history theater. According to the Hicks doctrine, the relation between theory and history should not be one-to-one, but rather flexible to a certain degree. Therefore, it would be quite interesting to compare the Liverpool merchants of Britain and the Ohmi merchants of Japan. It will be seen that they were engaged in their respective triangular trade, producing their respective socioeconomic systems. In short, we have to take a pluralistic view in order to fully understand the concept of risk and insurance from the viewpoint of economic history. |
| Keywords: | Liverpool merchants, Ohmi merchants, risk, insurance, triangular trade |
| JEL: | F14 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:shg:dpapea:19&r=ias |
| By: | Mishra, Khushbu; Gallenstein, Richard; Miranda, Mario J; Sam, Abdoul G; Toledo, Patricia T |
| Abstract: | The majority of the world’s poor live in rural areas and rely on agriculture for their income. Therefore, increasing agricultural efficiency via technology adoption is critical to reducing poverty in developing agrarian economies such as those in Sub-Saharan Africa (SSA). Despite its apparent advantages, SSA has one of the lowest adoption rates. Accordingly, the objective of this paper is to investigate if the availability of meso-and micro-level insurance encourages access to credit by relaxing demand side and supply side constraints. We further disaggregate the effects by gender of the farmer to see if any differential impacts exist over female versus male farmers. Using a randomized control trial and difference-in-difference estimation, we find that availability of meso-level insurance, when the banks are the policy holders, increases the likelihood of agricultural loan approvals for smallholder farmers. Gender level analysis shows that the likelihood increases for both female and male farmers. |
| Keywords: | agricultural technology adoption, credit access, insurance, panel data, Ghana, Food Security and Poverty, International Development, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:239853&r=ias |
| By: | Hampus Engsner; Mathias Lindholm; Filip Lindskog |
| Abstract: | We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is fixed. Then the residual cash flow is managed by repeated one-period replication using only cash funds. The latter part takes capital requirements and costs into account, as well as limited liability and risk averseness of capital providers. The cost-of-capital margin is the value of the residual cash flow. We set up a general framework for the cost-of-capital margin and relate it to dynamic risk measurement. Moreover, we present explicit formulas and properties of the cost-of-capital margin under further assumptions on the model for the liability cash flow and on the conditional risk measures and utility functions. Finally, we highlight computational aspects of the cost-of-capital margin, and related quantities, in terms of an example from life insurance. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1607.04100&r=ias |
| By: | Dillingh, Rik (Tilburg University, School of Economics and Management) |
| Abstract: | This dissertation consists of four empirical essays that study decisions on insurance, consumption and the accumulation and decumulation of wealth. The studies pay due attention to behavioral factors that may limit rationality, such as complexity and intertemporal choice. The first essay looks at the relationship between the saving decisions of specific groups in the Dutch labor market and whether or not they are covered by the occupational pension regime. Higher pension wealth turns out to be associated with lower private wealth accumulation, especially among the self-employed. The second essay examines whether the demand for health insurance is affected by the individual’s level of probability numeracy, which we define as the specific ability to understand and process probabilistic concepts. Our results indicate that those with intermediate levels of probability numeracy take out more health insurance, possibly due to ambiguity aversion. The third essay looks at the factors determining the decision to place a (visible) tattoo and relates this to several relevant economic and social outcomes, such as income and employment status and self-assessed health. We find some indications for less favorable outcomes for those with a tattoo, but the possibilities for causal inference are limited. The fourth essay studies the potential interest of Dutch homeowners in reverse mortgages. This is a mortgage loan that enables homeowners to liquidate a part of their housing wealth, without the need to move or increase monthly expenses. We find substantial potential interest, especially among the self-employed and those without children. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:0e2143e3-bd86-4302-90eb-ed58e2ffc901&r=ias |
| By: | Guglielmo Maria Caporale; Mario Cerrato; Xuan Zhang |
| Abstract: | Abstract This paper estimates a reduced-form model to assess the credit risk of General Insurance (GI) non-life firms in the UK. Compared to earlier studies, it uses a much larger sample including 30 years of data for 515 firms, and also considers a much wider set of possible determinants of credit risk. The empirical results suggest that macroeconomic and firm-specific factors both play important roles. Other key findings are the following: credit risk varies across firms depending on their business lines; there is default clustering in the GI industry; different reinsurance levels also affect the credit risk of insurance firms. The implications of these findings for regulators of GI firms under the coming Solvency II are discussed. |
| Keywords: | Insolvent, Doubly Stochastic, Insurance, Reinsurance |
| JEL: | G22 C58 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1591&r=ias |
| By: | Giacinta Cestone (Cass Business School, CSEF and ECGI); Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Francis Kramarz (CREST (ENSAE)); Giovanni Pica (Università di Milano, Centro Studi Luca d’Agliano, CSEF and Paolo Baffi Centre) |
| Abstract: | We investigate how Internal Labor Markets (ILMs) allow organizations to accommodate shocks calling for costly labor adjustments. Using data on workers’ mobility within French business groups, we find that adverse shocks affecting affiliated firms boost the proportion of workers redeployed to other group units rather than external firms. This effect is stronger when labor regulations are stricter and destination-firms are more efficient or enjoy better growth opportunities. Affiliated firms hit by positive shocks rely on the ILM for new hires, especially high-skilled workers. Overall, ILMs emerge as a co-insurance mechanism within organizations, providing job stability to employees as a by-product. |
| Keywords: | Internal Labor Markets, Organizations, Business Groups |
| JEL: | G30 L22 J08 J40 |
| Date: | 2016–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:397&r=ias |
| By: | Ha Tu; Lara Converse; Annie Doubleday; Paul Ginsburg |
| Abstract: | San Diego has long been a geographically well-defined health care market with high managed care penetration and a consolidated provider sector. |
| Keywords: | San Diego, Patient Care Models, Providers, California, health care |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:27734a2c5f5740e38b35c5e7427f33ae&r=ias |