nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒03‒19
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Social Insurance and Retirement: A Cross-Country Perspective By Tobias Laun; Johanna Wallenius
  2. Turkey; Financial Sector Assessment Program-Detailed Assessment of Observance of the IAIS Insurance Core Principles By International Monetary Fund.
  3. Fully Funded Social Security Pensions, Lifetime Risk and Income By Laps, Jochen
  4. Optimality of Excess-Loss Reinsurance under a Mean-Variance Criterion By Danping Li; Dongchen Li; Virginia R. Young
  5. National Intelligence and Private Health Expenditure: Do High IQ Societies Spend More on Health Insurance? By Burhan, Nik Ahmad Sufian; Salleh, Fauzilah; Burhan, Nik Mohd Ghazi
  6. The Incidence of High Medical Expenses by Health Status in Seven Developed Countries By Katherine Baird
  7. Mental Accounting, Access Motives, and Overinsurance By Fels, Markus
  8. Estimating Transport and Insurance Costs of International Trade By Fabienne Fortanier; Guannan Miao
  9. Indian Financial Sector; Structure, Trends and Turns By Rakesh Mohan; Partha Ray

  1. By: Tobias Laun; Johanna Wallenius
    Abstract: We study the role of old-age pensions, disability insurance and healthcare in accounting for the differing labor supply patterns of older individuals across countries. We develop a life cycle model of labor supply and health with heterogeneous agents. In our framework, people choose when to stop working and when/if to apply for disability and pension benefits. We find that the incentives faced by older workers differ hugely across countries. In fact, based solely on differences in social insurance programs, the model predicts even more cross-country variation in the employment rates of people aged 55-69 than we observe in the data.
    Keywords: Life cycle, Retirement, Disability insurance, Health
    JEL: E24 J22 J26
    Date: 2016–06
  2. By: International Monetary Fund.
    Abstract: This assessment of the current state of observance of the International Association of Insurance Supervisors (IAIS) Insurance Core Principles in Turkey has been completed as a part of a Financial Sector Assessment Program (FSAP) undertaken by the International Monetary Fund and World Bank during 2016. It reflects the regulatory and supervisory framework in place as of the date of the completion of the assessment.
    Keywords: Financial Sector Assessment Program;Insurance;Insurance supervision;Insurance regulations;Reports on the Observance of Standards and Codes;Turkey;
    Date: 2017–02–08
  3. By: Laps, Jochen
    Abstract: The paper analyzes the welfare consequences of insuring mortality risk by means of standard, fully funded Social Security pensions when individuals wish to make transfers to their heirs. In the presence of uninsured mortality risk, within-family transfers depend on realized lifespan. While Social Security crowds out private transfers, it provides transfer insurance and insurance of the ex ante risk of future generations inheriting a particular amount of transfer wealth. We find that, once ex ante insurance is taken into account, Social Security is welfare improving over the long-run as long as capital is not too productive and the transfer motive is not too strong. Altruists gain far less from Social Security than egoists.
    JEL: D91 E61 H55
    Date: 2016
  4. By: Danping Li; Dongchen Li; Virginia R. Young
    Abstract: In this paper, we study an insurer's reinsurance-investment problem under a mean-variance criterion. We show that excess-loss is the unique equilibrium reinsurance strategy under a spectrally negative L\'{e}vy insurance model when the reinsurance premium is computed according to the expected value premium principle. Furthermore, we obtain the explicit equilibrium reinsurance-investment strategy by solving the extended Hamilton-Jacobi-Bellman equation.
    Date: 2017–03
  5. By: Burhan, Nik Ahmad Sufian; Salleh, Fauzilah; Burhan, Nik Mohd Ghazi
    Abstract: Studies show that high IQ people practice healthier lifestyles, which result in better health status. However, do such people spend more on healthcare? We employed hierarchical multiple regression analysis to examine the impact of national average IQ on private health expenditure, especially health insurance at cross-country level. Controlling for income, the old-age dependency ratio, and government expenditure on health, we found that IQ was positively significant on out-of-pocket healthcare expenditure but negatively associated with private health insurance expenditure. We suggest that high IQ societies pay less for health insurance because they are more capable of preventing illnesses or injuries and they live in healthier and safer environments, which are less vulnerable to diseases. In addition, they are more efficient at calculating risk and making choices according to their future healthcare needs. Hence, with price dispersion and various choices of premium schemes available within the health insurance industry, high IQ people may be more efficient at obtaining lower effective prices of premiums.
    Keywords: health insurance; income; intelligence; national IQ; private health expenditure; public health
    JEL: H51 I13 I25 J24
    Date: 2015–06–15
  6. By: Katherine Baird
    Abstract: Health care policy seeks to ensure that citizens are protected against excessive out-of-pocket (OOP) expenses. Yet rising health care costs are pressuring private and social insurance schemes to shift toward more cost-sharing measures. This paper uses household surveys from seven countries to measure the burden of health expenditures for individuals with similar health conditions. It compares countries based on the extent to which citizens—those with health problems in particular—devote a large share of their income to medical expenses. The paper finds that in all countries but France, and to a lesser extent Slovenia, unhealthy citizens face considerably higher medical costs than do the healthy. As many as one-quarter of less healthy citizens in the U.S., Poland, Russia and Israel have large OOP expenses. The paper finds increased exposure to high medical expenses within countries is also associated with increased disparities between the unhealthy and healthy in the financial burden of OOP costs. The levels of high OOP spending uncovered, and their disparate weight on those with health problems (who are also disproportionately poor and elderly) underscore the potential for high OOP expenses to undermine core objectives of health care systems, including those of equitable financing, equal access, and improved medical outcomes.
    Keywords: Cost of illness, Health insurance, Health policy, Healthcare financing, Cost sharing
    Date: 2016–05
  7. By: Fels, Markus
    Abstract: Consumers frequently overinsure modest risks. I argue that confining consumers' insurance motives to a single motive - risk aversion - is responsible for the difficulty to rationalize this behavior. People who perform mental accounting have an additional motive for buying insurance. They perceive a risk of having insufficient means to self-insure. This complements behavioral approaches to explain the profitability of warranties and the dislike of deductibles. It accounts for several empirical regularities that are difficult to reconcile within existing models. Finally, it suggests that the way in which an insurer pays benefits influences the value and the cost of insurance.
    JEL: D11 D14 D81
    Date: 2016
  8. By: Fabienne Fortanier (OECD); Guannan Miao (OECD)
    Abstract: Although the costs associated with the international transport and insurance of merchandise trade are an important determinant of the volume and geography of international trade, remarkably little (official) data exist. Combining the largest and most detailed cross-country sample of official national statistics on explicit CIF-FOB margins to date with estimates from an econometric gravity model, and using a novel approach to pool product codes across HS vintages, this paper presents the new OECD Database on International Transport and Insurance Costs (ITIC) that aims to fill this gap, and describes the methodology used in its construction. The database details the bilateral, product level international trade and insurance costs for more than 180 countries and partners, over 1 000 individual products, for the 1995-2014 time period, and provides an important new tool to further our understanding of global value chains, whilst also forming an important statistical input to the development of coherent and balanced bilateral trade statistics and to the TiVA database. In particular the database provides potential new insights on how distance, natural barriers such as mountain ranges, and inadequate infrastructure, shape regional (and global) value chains.
    Keywords: CIF-FOB margins, International merchandise trade, International transport and insurance costs
    JEL: F10 F14
    Date: 2017–03–16
  9. By: Rakesh Mohan; Partha Ray
    Abstract: This paper traces the story of Indian financial sector over the period 1950–2015. In identifying the trends and turns of Indian financial sector, the paper adopts a three period classification viz., (a) the 1950s and 1960s, which exhibited some elements of instability associated with laissez faire but underdeveloped banking; (b) the 1970s and 1980s that experienced the process of financial development across the country under government auspices, accompanied by a degree of financial repression; and (c) the period since the 1990s till date, that has been characterized by gradual and calibrated financial deepening and liberalization. Focusing more the third period, the paper argues that as a consequence of successive reforms over the past 25 years, there has been significant progress in making interest and exchange rates largely market determined, though the exchange rate regime remains one of managed float, and some interest rates remain administered. Considerable competition has been introduced in the banking sector through new private sector banks, but public sector banks continue have a dominant share in the market. Contractual savings systems have been improved, but pension funds in India are still in their infancy. Similarly, despite the introduction of new private sector insurance companies coverage of insurance can expand much further, which would also provide greater depth to the financial markets. The extent of development along all the segments of the financial market has not been uniform. While the equity market is quite developed, activities in the private debt market are predominantly confined to private placement form and continue to be limited to the bluechip companies. Going forward, the future areas for development in the Indian financial sector would include further reduction of public ownership in banks and insurance companies, expansion of the contractual savings system through more rapid expansion of the insurance and pension systems, greater spread of mutual funds, and development of institutional investors. It is only then that both the equity and debt markets will display greater breadth as well as depth, along with greater domestic liquidity. At the same time, while reforming the financial sector, the Indian authorities had to constantly keep the issues of equity and efficiency in mind.
    Keywords: Financial sector;India;Banking;Insurance;Capital markets;External sector;Nonbank financial sector;Pension funds;India, Financial Sector Reforms, Banks, Insurance, Pension Funds, Financial Markets.
    Date: 2017–01–20

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