nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒10‒09
five papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Losing health insurance when young: Impacts on usage of medical services and health in Colombia By Gaviria Garcés, Carlos Felipe; De la Mata, Dolores
  2. Attack-Aware Cyber Insurance of Interdependent Computer Networks By Rui Zhang; Quanyan Zhu
  3. Coupling direction of the European Banking and Insurance sectors using inter-system recurrence networks By Peter Martey Addo
  4. Does long-term care subsidisation reduce unnecessary hospitalisations? By Joan Costa-Font; César Jiménez-Martínez; Cristina Vilaplana
  5. Changing FHA Mortgage Insurance Premiums and the Effects on Lending By Daniel R. Ringo; Neil Bhutta

  1. By: Gaviria Garcés, Carlos Felipe; De la Mata, Dolores
    Abstract: Abstract: Nearly 8 percent of the young adults in Colombia are “aged out" from their parents' health insurance coverage when they turn 18 years old, making them the group with the lowest health insurance coverage among all age groups. In this study we exploit a regulation in Colombia that exogenously changes health insurance coverage of young adult dependents to analyze the effects on their usage of medical services and health status. We assess this effect using a regression discontinuity design (RDD) and data from the Encuesta Nacional de Calidad de Vida Survey for Colombia from 2010 to 2013. Losing health insurance coverage implies a change in usage within the pool of different medical services, led by a change in their relative prices. As a result, some medical services are prone to be less used (i.e. preventive services), while other medical services are more consumed (i.e. private medical services and emergency department [ED] visits). Additionally, since under Colombian regulation, ED care cannot be denied to anyone if their life is at risk, regardless of health insurance status, uninsured young adults tend to use this service more instead of regular medical services (such as preventive healthcare or visits to physicians or specialists). We find, consistent with the change in relative prices, that losing health insurance when turning 18 years old increases visits to the ED, reduces preventive care visits with a physician, and increases the usage of private medical services (outof-pocket) for this age group. These results imply a substitution of cheaper medical services for more expensive ones when individuals turn 18 years old in Colombia.
    Keywords: Health Insurance, Young Adults, Healthcare Usage, Emergency Department Visits, Colombia's Healthcare System, Regression Discontinuity, Developing Country.
    JEL: G22 I13 I18
    Date: 2016–09–27
  2. By: Rui Zhang (Department of Electrical and Computer Engineering, Tandon School of Engineering, New York University, USA); Quanyan Zhu (Department of Electrical and Computer Engineering, Tandon School of Engineering, New York University, USA)
    Abstract: Cyber insurance is a valuable approach to mitigate further the cyber risk and its loss in addition to the deployment of technological cyber defense solutions such as intrusion detection systems and firewalls. An effective cyber insurance policy can reduce the number of successful cyber attacks by incentivizing the adoption of preventative measures and the implementation of best practices of the users. To study cyber insurance in a holistic manner, we first establish a bi-level game-theoretic model that nests a zero-sum game in a moral-hazard type of principal-agent game to capture complex interactions between a user, an attacker, and the insurer. The game framework provides an integrative view of the cyber insurance and enables a systematic design of incentive compatible and attack-aware insurance policy. The framework is further extended to study a network of users and their risk interdependencies. We completely characterize the equilibrium solutions of the bi-level game. Our analytical results provide a fundamental limit on insurability, predict the Peltzman effect, and reveal the principles of zero operating profit and the linear insurance policy of the insurer. We provide analytical results and numerical experiments to corroborate the analytical results and demonstrate the network effects as a result of the strategic interactions among three types of players.
    Keywords: Cyber Insurance, Network Security, Moral Hazard, Information Asymmetry, Network Effects, Security Games, Mechanism Design
    JEL: G22 D80 D86
    Date: 2016–09
  3. By: Peter Martey Addo (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Modern financial systems exhibit a high degree of interdependence making it difficult in predicting. This has raise concerns on the correct identification of coupling direction in financial sectors of the economy. This study explores a “two-way” risk connection between the European banking and insurance sector based on geometrical closeness of observations. Specifically, the study looks at the inter-system recurrence networks in tracing dynamical transitions and detecting coupling direction between these sectors. The overall results shows that the banking sector is central in risk transmission compared to the insurance sector. A comprehensive discussion of the feasibility and relevance of the approach in studying systemic risk is provided.
    Abstract: Les systèmes financiers modernes présentent un degré élevé d'interdépendance rendant difficile la prédiction. Cela a soulevé des questions concernant l'identification correcte d'une direction de couplage dans les secteurs financiers de l'économie. Cette étude explore "en deux sens" la connexion des risques entre le système bancaire européen et le secteur de l'assurance, basée sur la proximité géométrique des observations. Plus précisément, l'étude se penche sur les réseaux de récurrence inter-système en traçant des transitions dynamiques et en détectant la direction de couplage entre ces secteurs. Les résultats globaux montrent que le secteur bancaire est un élément central dans la transmission de risque par rapport au secteur de l'assurance. Une discussion complète de la faisabilité et la pertinence de l'approche dans l'étude du risque systémique est fournie.
    Keywords: financial institutions,recurrence networks,systemic risk,recurrence plots,parcelles de récidive,réseaux de récurrence,risque systémique,institution financières
    Date: 2015–06
  4. By: Joan Costa-Font; César Jiménez-Martínez; Cristina Vilaplana
    Abstract: The expansion of long-term care (LTC) coverage may improve health system efficiency by reducing hospitalisations (bed-blocking), and pave the way for the implementation of health and social care coordination plans. We draw upon the quasi-experimental evidence from the main expansion of long term care increase subsidisation in Spain in 2007 to examine the causal effect of the expansion of LTC subsidisation and coordination on hospitalisations (both on the internal and external margin) and the hospital length of stay. In addition, we examine the 2012 austerity budget cuts that reduced the subsidy. We find robust evidence of a reduction in hospitalisations and the length of stay after the expansion of LTC subsidisation. However, the reduction in hospitalisations is heterogeneous to the existence of health and social care coordination plans and type of subsidy. Overall, we estimate savings related to hospitalisations of up to 11% of total hospital costs. Consistently, subsidy reduction is found to attenuate bed-blocking gains.
    Keywords: hospitalisation; long-term care reform; Spain; bed-blocking; hurdle Poisson model
    JEL: H53 I18 J14
    Date: 2016–09
  5. By: Daniel R. Ringo; Neil Bhutta
    Abstract: This note explores the effect of changes in Federal Housing Administration (FHA) mortgage insurance premiums (MIP) on mortgage borrowing activity. Reacting to changing conditions in the mortgage market as well as the state of its own balance sheet, the FHA has adjusted its pricing rules a number of times in the wake of the financial crisis.
    Date: 2016–09–29

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