nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒09‒25
twelve papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. An Evaluation of the Degree of Competition in the French Life Insurance Industry By Gagnepain, Philippe; Ivaldi, Marc
  2. The extension of private health insurance: an inequitable and inefficient strategy By Philippe Batifoulier
  3. Optimal unemployment insurance and international risk sharing By Moyen, Stéphane; Stähler, Nikolai; Winkler, Fabian
  4. Multiple Contracting in Insurance Markets By Thomas Mariotti
  5. Medical insurance and expenditure thresholds for Vietnamese patient satisfaction with healthcare services By Quan-Hoang Vuong; Thu Trang Vuong
  6. Tree-based censored regression with applications in insurance By Olivier Lopez; Xavier Milhaud; Pierre-Emmanuel Thérond
  7. The Price of Growth: Consumption Insurance in China 1989-2009 By Yu Zheng; Raul Santaeulalia
  8. Does Social Health Insurance Reduce Financial Burden? Panel Data Evidence from India By Mehtabul Azam
  10. Insurance-markets Equilibrium with Sequential Non-convex Private- and Public-Sector Labor Supply By Vasilev, Aleksandar
  11. Change in Strategic Interaction after Introducing Policy By Nakazawa, Katsuyoshi; Matsuoka, Hirokazu
  12. Deriving Risk Adjustment Payment Weights to Maximize Efficiency of Health Insurance Markets By Timothy J. Layton; Thomas G. McGuire; Richard C. van Kleef

  1. By: Gagnepain, Philippe; Ivaldi, Marc
    Abstract: This article focuses on the life insurance industry in France and attempts to shed light on whether the insurers behave in a competitive fashion, or whether, on the contrary, they take coordinated decisions. We propose several empirical tests, which entail the estimation of the Boone indicator, a tool which explores the relationship between firms’ relative costs and profits, the evaluation of the switching costs beard by consumers when they decide to change insurer, and the construction of a structural model, which is based on an oligopolistic framework where insurers propose differentiated products. Our results suggest unambiguously that firms do follow a competitive behavior.
    Date: 2016–09
  2. By: Philippe Batifoulier (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The privatisation of health care in Europe is shifting the cost burden from public insurance to private insurance and making health care one of the new driving forces behind capitalism. It is supported by the economic theory of health insurance, which argues that public health coverage creates a perverse incen-tive, while private insurance helps to make patients more responsible. However, not only is this strategy inequitable, it is also inefficient because it generates additional expenditure.
    Keywords: healthcare
    Date: 2016–04–08
  3. By: Moyen, Stéphane; Stähler, Nikolai; Winkler, Fabian
    Abstract: We discuss how cross-country unemployment insurance can be used to improve international risk sharing. We use a two-country business cycle model with incomplete financial markets and frictional labor markets where the unemployment insurance scheme operates across both countries. Cross-country insurance through the unemployment insurance system can be achieved without affecting unemployment outcomes. The Ramsey-optimal policy however prescribes a more countercyclical replacement rate when international risk sharing concerns enter the unemployment insurance trade-off. We calibrate our model to Eurozone data and find that optimal stabilizing transfers through the unemployment insurance system are sizable and mainly stabilize consumption in the periphery countries, while optimal replacement rates are countercylical overall. Moreover, we find that debt-financed national policies are a poor substitute for fiscal transfers.
    Keywords: Unemployment Insurance,International Business Cycles,Fiscal Union,International Risk Sharing
    JEL: E32 E62 H21 J64
    Date: 2016
  4. By: Thomas Mariotti (Toulouse School of Economics)
    Abstract: We study a model of insurance markets in which multiple contracting endogenously emerges in equilibrium. Different layers of coverage are fairly priced according to the types of consumers who purchase them, giving rise to cross-subsidies between types, but not between contracts. Riskier consumers demand greater total coverage at an increasing unit price, but the contracts offered by firms exhibit quantity discounts. We emphasize the need to regulate the supply side of insurance markets, while consumers can be left free to choose their coverage level.
    Date: 2016
  5. By: Quan-Hoang Vuong; Thu Trang Vuong
    Abstract: This short communication report some new results obtained from a medical survey among 900 Vietnamese patients. Both income and medical expenditure have positive influence to improving patient satisfaction. But insurance reimbursement rate has negative influence. Patients with residency status are more demanding than those without. The more seriously ill, the less patients find the health services to be satisfactory. The probability of satisfaction conditional on insurance reimbursement is lower for patients with residency status, and higher for those without. There exist thresholds of income, expenditures and insurance reimbursement rate, surpassing which probabilistic trends switch. The expenditure threshold for resident patients is almost three times that for nonresidents. The computed “insurance threshold” exists only within the group of non-resident patients, ~65%, suggesting that getting a reimbursement rate higher than this can be very difficult. Therefore, the government's ambitious goal of universal coverage may be both unrealistic and too rigid as patients with different conditions show different perceptions toward healthcare services.
    Keywords: Health insurance; threshold; medical expenditures; healthcare policy; Vietnam
    JEL: I18
    Date: 2016–09–22
  6. By: Olivier Lopez (LSTA - Laboratoire de Statistique Théorique et Appliquée - UPMC - Université Pierre et Marie Curie - Paris 6 - CNRS - Centre National de la Recherche Scientifique); Xavier Milhaud (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1); Pierre-Emmanuel Thérond (Galea & Associés, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: We propose a regression tree procedure to estimate the conditional distribution of a variable which is not directly observed due to censoring. The model that we consider is motivated by applications in insurance , including the analysis of guarantees that involve durations, and claim reserving. We derive consistency results for our procedure, and for the selection of an optimal subtree using a pruning strategy. These theoretical results are supported by a simulation study, and two applications involving insurance datasets. The first concerns income protection insurance, while the second deals with reserving in third-party liability insurance.
    Keywords: Survival analysis,censoring,regression tree,model selection,insurance,CART
    Date: 2016–09–12
  7. By: Yu Zheng (City University of Hong Kong); Raul Santaeulalia (Washington University St. Louis)
    Abstract: Growth entails taking risks. This implies that the welfare gains of growth hinge on the ability of households to insure consumption against the risks associated with growth. We exploit a novel and unique opportunity to study this question using as laboratory an economy, China, that has witnessed enormous and sustained economic growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that triples from 1989 to 2009. The loss of consumption insurance has implications for the welfare assessment of growth across time and space.
    Date: 2016
  8. By: Mehtabul Azam (Oklahoma State University)
    Abstract: Indian government launched a National Health Insurance Scheme known as Rashtriya Swasthya Bima Yojana (RSBY) in 2008 that provides cashless health services to poor households in India. We evaluate the impact of RSBY on RSBY beneficiary households' (Average Treatment Impact on the Treated) utilization of health services, per capita out-of-pocket (OOP) expenditure, and per patient OOP expenditures on major morbidities. To address the issue of non-randomness in enrollment into the scheme, we exploit the longitudinal aspect of a large nationally representative household survey data to implement difference-in-differences with matching. We find some evidence of positive impact of RSBY on utilization of health services by RSBY beneficiary households in rural India but not in urban India. However, there is no evidence that the RSBY reduced per person OOP expenditure for RSBY households in both rural and urban areas. Conditional on having received medical treatment for major morbidity, we find lower expenditure on medicine for a RSBY cardholder patient in rural areas.
    Keywords: SHI, RSBY, IHDS, out-of-pocket expenditure, health services utilization
    JEL: I1 I18 I38
    Date: 2016–09
  9. By: Rocco Roberto Cerchiara; Francesco Acri (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)
    Abstract: Danish fire insurance data has been analyzed in several papers, using different models. In this paper we investigate the improving of the fitting for the Danish fire insurance data according to composite models, including dependence structure by copula functions and Fast Fourier Transform.
    Keywords: Composite models, Copula, Fast Fourier Transform
    JEL: C10 C63 C65 G22
    Date: 2016–09
  10. By: Vasilev, Aleksandar
    Abstract: This paper describes the lottery- and insurance-market equilibrium in an economy with non-convex private- and public-sector employment. In contrast to Vasilev (2015a, 2015b), the public-sector labor supply decision is a sequential one. This requires two separate insurance market to operate, one for private-sector work, and one for public- sector employment. In addition, given that the labor choice for private- and public- sector hours is made in succession, the insurance market for public emloyment needs to open once the other insurance market has closed. This segmentation and sequentiality of insurance markets operation is a new result in the literature and a direct consequence of the double non-convexity, and the sequential nature of the sectoral labor supply decision.
    Keywords: indivisible labor,public employment,sequential lotteries,insurance
    JEL: J22 J45
    Date: 2016
  11. By: Nakazawa, Katsuyoshi; Matsuoka, Hirokazu
    Abstract: This study investigates the change in the strength of strategic interaction from a policy introduction stage to a mature stage. The bulk of literature confirms the strategic interaction among local governments, but does not consider the change in the strength of strategic interaction. Our hypothesis is that the strength of strategic interaction decreases from a policy introduction stage to a mature stage because uncertainty at the policymaking stage might become weaker as time elapses. We focus on the Japanese long-term care insurance (LTCI) system that was introduced in fiscal year 2000. Our findings suggest that since municipalities should forecast the demand for long-term care and set the premium over a three-year “program management period,” they have a strong incentive to refer to the premium setting of surrounding municipalities. Moreover, the incentive would decrease as periods elapse. The empirical evidence is consistent with our hypothesis that the strength of strategic interaction on LTCI premium setting is gradually reduced from the early stage to the mature stage.
    Keywords: Spatial autoregressive model; Information spillover; Long-term care insurance; Premium setting; Change in strategic interaction
    JEL: H73 H75 H77 P25 R12
    Date: 2016–09–15
  12. By: Timothy J. Layton; Thomas G. McGuire; Richard C. van Kleef
    Abstract: Risk adjustment of payments to health plans is fundamental to regulated competition among private insurers, which serves as the basis of national health policy in many countries. To date, estimation and evaluation of a risk adjustment model has been a two-step process. In a first step, the risk-adjustment payment weights are estimated using statistical techniques, generally ordinary-least squares, to maximize some statistical objective such as the R-squared; then, in a second step, the risk adjustment model is evaluated, usually with simulation methods, but without an explicit framework describing the objective of the model. This paper first develops such a framework and then uses it to replace the two-step “estimate-then-evaluate” approach with a one-step “estimate-to-maximize-the-objective” approach. We assume that the objective of risk adjustment is to minimize the loss from service-level distortions due to adverse selection incentives, and we derive expressions for the service-level distortions as a linear function of the risk adjustment payment weights. We show that when the number of risk adjustor variables exceeds the number of decisions plans make about service allocations, incentives for service-level distortion can always be eliminated. Under these circumstances the welfare maximizing payment weights can be found with a constrained least-squares regression where the constraints are the conditions under which plan actions achieve efficiency. We illustrate this method with the data used to estimate risk adjustment payment weights in the Netherlands (N=16.5 million). When the number of “services” exceeds the number of available risk adjustors, however, it is not possible to eliminate incentives for service-level distortion. In this case, a regression on transformed data produces the (second-best) payment weights that minimize welfare loss.
    JEL: I11 I13 I18
    Date: 2016–09

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