nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒10‒08
five papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Introducing Risk Adjustment and Free Health Plan Choice in Employer-Based Health Insurance: Evidence from Germany By Pilny, Adam; Wübker, Ansgar; Ziebarth, Nicolas R.
  2. The costs of annuitizing By Cecilia Dassatti; Rodrigo Lluberas
  3. "The Effect of Good Corporate Governance and Premium Growth on the Performance of Insurance Companies " By Markonah
  4. Risk as Impediment to Privatization? The Role of Collective Fields in Extended Agricultural Households By Delpierre, Matthieu; Guirkinger, Catherine; Platteau, Jean-Philippe
  5. Parental Leave, (In)formal Childcare and Long-term Child Outcomes By Danzer, Natalia; Halla, Martin; Schneeweis, Nicole; Zweimüller, Martina

  1. By: Pilny, Adam; Wübker, Ansgar; Ziebarth, Nicolas R.
    Abstract: To equalize differences in health plan premiums due to differences in risk pools, German legislature introduced a simple Risk Adjustment Scheme (RAS) based on age, gender and disability status in 1994. In addition, effective 1996, consumers gained the freedom to choose among hundreds of existing health plans, across employers and state-borders. This paper (a) estimates RAS pass-through rates on premiums, financial reserves, and expenditures and assesses the overall impact on market price dispersion. Moreover, it (b) characterizes health plan switchers and their annual and cumulative switching rates over time. Our main findings are based on representative enrollee panel data linked to administrative RAS and health plan data. We show that sickness funds with bad risk pools and high pre-RAS premiums lowered their total premiums by 42 cents per additional euro allocated by the RAS. Consequently, post-RAS, health plan prices converged but not fully. Because switchers are more likely to be white collar, young and healthy, the new consumer choice resulted in more risk segregation and the amount of money redistributed by the RAS increased over time.
    Keywords: employer-based health insurance,free health plan choice,risk adjustment,health plan switching,adverse selection,German sickness funds,SOEP
    JEL: D12 H51 I11 I13 I18
    Date: 2017
  2. By: Cecilia Dassatti (Banco Central del Uruguay); Rodrigo Lluberas (Banco Central del Uruguay)
    Abstract: This study analyzes the costs associated with annuitization and provides estimates of the margin that an efficient insurance company could charge in order to cover these costs. Using data from the financial statements filed by insurance companies to the regulator, we estimate a translog cost function following the stochastic frontier methodology. Our dataset consists on quarterly balance sheet information from 13 Uruguayan insurance companies over the period 2005-2015. We find that the average cost inefficiency is 17.8% and that there is substantial heterogeneity across firms. In addition, our results show that the annuity margin that an efficient insurance company could charge in order to cover its administrative costs is of 11 basis points over the market long-term interest rate.
    Keywords: annuities, insurance firms, annuity margin, stochastic frontier, cost effciency
    JEL: D24 G22 G28 H55
    Date: 2016
  3. By: Markonah (Faculty of Economics and Business, University of Brawijaya, Indonesia Author-2-Name: Achmad Sudiro Author-2-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia Author-3-Name: Surachman Author-3-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia Author-4-Name: Mintarti Rahayu Author-4-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia)
    Abstract: "Objective – Insurance companies in Indonesia are considered an important part of society by the Indonesian government. Corporate governance was a major problem during the post-financial crisis period, particularly in emerging markets in Indonesia. Financial Institutions considered the possibility of increasing insurance premiums to cover their operating costs and increase their profits. The purpose of this study is to measure the effect of corporate governance and preium growth on the performance of the insurance sector, to determine the characteristics of good corporate governance. Technique/Methodology – The samples used in this study include insurance companies listed on the Indonesia Stock Exchange between 2011 and 2015. The data used in the study is derived from the Indonesian Stock Exchange Corner. The method of analysis used is descriptive statistics and linear regression. The research objectives are to analyze the influence of the independent variables on the dependent variable. A purposive sampling method is used to determine the sample size of the study. This method generated a sample of 9 commercial insurance companies. Findings – The findings show that corporate governance is significantly and positively related to ROA whereas Insurance Premiums are not significantly related to ROA. Novelty – Study suggests that the insurance companies must aim to improve corporate governance structures by finding solutions to existing problems and improving the management structures of the company, in order to attract future investment which will ultimately lead to an increase in ROA and ROE."
    Keywords: Corporate Governance; Insurance Premium; Corporate Performance; Growth.
    JEL: G22 L25 M41
    Date: 2017–04–15
  4. By: Delpierre, Matthieu; Guirkinger, Catherine; Platteau, Jean-Philippe
    Abstract: As in the case of cooperatives, collective fields in extended agricultural households act as an insurance device, but entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization provides good incentives but decreases the level of risk-sharing. The classical analysis of this tradeoff rules out another major risk-sharing mechanism, namely income transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production may or may not be maintained with income transfers. We show that an increase in the value of the household members' exit option or a decrease in patience decreases the optimal rate of privatization, while larger households are more likely to privatize land.
    Keywords: Privatization; Risk-Sharing; Land Tenure; Mixed Farms
    Date: 2017–10
  5. By: Danzer, Natalia; Halla, Martin; Schneeweis, Nicole; Zweimüller, Martina
    Abstract: There is a strong debate about who should provide care to young children. Governments offer two alternative types of institutions: formal childcare and parental leave. We assess the effectiveness of these two competing institutions in promoting child development by comparing how a major parental leave extension from one to two years affected Austrian children's long-term outcomes in communities with and without formal childcare facilities for under-3-year-olds. Empirical identification of treatment effects is based on a sharp birthday cutoff-based discontinuity in the eligibility for extended parental leave and geographical variation in formal childcare. We find evidence that the counterfactual mode of care is decisive. If formal childcare is available, the reform induced a replacement of formal childcare by maternal care and had zero (or negative effects) on child outcomes. Whereas if formal childcare is not available, informal childcare was replaced by maternal care, and the reform improved child outcomes. This heterogeneity is driven by the additional time with the mother in the second year of the child's life and not by a change in maternal income. We conclude that care provided by mothers or formal institutions is superior to informal care-arrangements.
    Keywords: Parental leave,formal childcare,informal childcare,child development,maternal labor supply,fertility
    JEL: J13 H52 J22 J12 I38
    Date: 2017

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