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on Insurance Economics |
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Issue of 2018‒04‒23
sixteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Ron van der Heijden (CPB Netherlands Bureau for Economic Policy Analysis); Thomas McGuire; Erik Schut |
| Abstract: | In health care systems with a competitive health insurance market, governments or other sponsors (e.g. employers) often subsidize premiums to encourage enrolment. These subsidies are typically independent of plan choice leaving the absolute premium differences in place so as not to distort consumer choice of plan. Such subsidies do, however, change the relative premium differences across plans, which, according to theories from behavioral economics, can affect choice. Consumers might be sensitive to differences relative to a reference premium (“relative thinking”). Furthermore, consumers might be particularly sensitive to a reference premium of zero (“zero-price effect”), a relevant range for some subsidized health insurance markets. This paper tests these ideas with two sources of evidence. We argue that observed equilibria in Germany and the U.S. Medicare Advantage markets are consistent with a powerful zero-price effects, resulting in an equilibrium focal pricing at zero. This contrasts with the Netherlands where equilibrium premiums are well above zero. In an empirical test using hypothetical questions in a web-based survey in these three countries, we also find evidence for both a relative thinking and a zero-price effect in the demand for health insurance. Our findings imply that well-designed subsidies can leverage relative thinking to increase demand elasticity for health plans. Creation of a powerful reference price (e.g., at zero), however, risks subverting price competition. |
| JEL: | D91 H21 I13 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:366&r=ias |
| By: | Minke Remmerswaal (CPB Netherlands Bureau for Economic Policy Analysis); Jan Boone (CPB Netherlands Bureau for Economic Policy Analysis); Michiel Bijlsma (CPB Netherlands Bureau for Economic Policy Analysis); Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | Since 2006, the Dutch population has faced two different cost-sharing schemes in health insurance for curative care: a mandatory rebate of 255 euros in 2006 and 2007, and since 2008 a mandatory deductible. Using administrative data for the entire Dutch population, we compare the effect of both cost-sharing schemes on healthcare consumption between 2006 and 2013. We use a regression discontinuity design which exploits the fact that persons younger than eighteen years old neither face a rebate nor a deductible. Our fixed effect estimate shows that for individuals around the age of eighteen, a one euro increase of the deductible reduces healthcare expenditures 18 eurocents more than a euro increase of the rebate. These results demonstrate that differences in the design of a cost-sharing scheme can lead to substantial different effects on total healthcare expenditure. |
| JEL: | I12 I13 C23 D12 H51 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:367&r=ias |
| By: | Kazianga, Harounan; Wahhaj, Zaki |
| Abstract: | We present findings from a pilot study exploring whether and how existing ties between urban migrants and rural farmers may be used to provide the latter improved access to formal insurance. Urban migrants in Ouagadougou (the capital of Burkina Faso) originating from nearby villages were offered, at the prevailing market price, a rainfall index insurance product that can potentially protect their rural relatives from adverse weather shocks. The product had an uptake of 22% during the two-week subscription window. Uptake rates were higher by 17-22 percentage points among urban migrants who were randomly offered an insurance policy that would make pay-outs directly to the intended beneficiary rather than the subscriber. We argue that rainfall index insurance can complement informal risk-sharing networks by mitigating problems of informational asymmetry and self-control issues. |
| Keywords: | Microinsurance markets,Indexed insurance,Rainfall,Migration,Informal insurance networks |
| JEL: | O15 O16 G21 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:194&r=ias |
| By: | Andersen, Torben M; Kristoffersen,; Svarer, Michael |
| Abstract: | The past employment history - employment requirements - is part of the eligibility conditions for unemployment insurance in most western countries. In a standard search-matching model, we show how employment requirements strengthen the reentitlement effect and thereby changes the trade-off between insurance and incentives in the design of the optimal insurance scheme. Deploying employment requirements for benefit eligibility may thus allow for both higher benefit levels and longer duration, and yet labor market performance is improved. When the need for insurance increases due to higher risk aversion, employment requirements becomes less lenient, and oppositely when the environment becomes more risky. |
| Keywords: | incentives; job-search; Reentitlement effects; unemployment insurance. |
| JEL: | E32 H3 J65 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12802&r=ias |
| By: | Claudia Ceci; Katia Colaneri; Alessandra Cretarola |
| Abstract: | In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time of the insured as well as the trend of a portfolio traded in the financial market, where investments in a riskless asset, a risky asset and a longevity bond are allowed. We propose a modeling framework that takes into account mutual dependence between the financial and the insurance markets via an observable stochastic process, which affects the risky asset and the mortality index dynamics. Since the market is incomplete due to the presence of basis risk, in alternative to arbitrage pricing we use expected utility maximization under exponential preferences as evaluation approach, which leads to the so-called indifference price. Under partial information this methodology requires filtering techniques that can reduce the original control problem to an equivalent problem in complete information. Using stochastic dynamics techniques, we characterize the value function as well as the indifference price in terms of the solution to a quadratic-exponential backward stochastic differential equation. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1804.00223&r=ias |
| By: | International Monetary Fund |
| Abstract: | This technical note provides an assessment of the recent development of regulation and supervision of the Indian insurance sector. It is part of the 2017 Financial Sector Assessment Program (FSAP) for India. The note focuses on several key developments in the regulation and supervision of the insurance sector since the last FSAP (2011), and evaluates the extent to which the recommendations of the 2011 India FSAP have been addressed. The note does not present a full assessment of observance of the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICPs). The sector has continued to grow in scale and diversity, surmounting the adverse impact of the global financial crisis, although penetration remains relatively low. Public sector insurers continue to command a majority of the market and life insurance predominates, with about 75 percent of total premiums. Non-life insurance is dominated by motor insurance. Penetration rates are unchanged from 2011 and generally lower than in comparator countries, especially in non-life. While traditional sale channels continue to predominate, there is increasing diversity in distribution. Risks in life insurance are relatively well spread and in non-life are mainly short-term. The sector is profitable and solvency exceeds minimum requirements, but with exceptions. |
| Date: | 2018–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/86&r=ias |
| By: | Jane Ahn; Christopher Fleming; Cyrus Jadun; Sean Kirk; Rebecca Lester; Jenna Libersky; Debra Lipson; Christine O'Malley; Susan Williams |
| Abstract: | The data and information presented in this report were collected directly from all states, the District of Columbia, and US territories. |
| Keywords: | Medicaid managed care, primary care case management, primary care provider, enrollment data, Medicare-Medicaid eligibles, dual eligibles, MLTSS, managed long-term services and supports, Section 1115, Section 1902, Section 1905, Affordable Care Act, ACA, behavioral health organization, fee-for-service, Medicaid waivers, mental health |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:b60c6bb041e4483facb389d8469d1cef&r=ias |
| By: | Christophette Blanchet-Scalliet (ICJ - Institut Camille Jordan [Villeurbanne] - ECL - École Centrale de Lyon - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - INSA Lyon - Institut National des Sciences Appliquées de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Diana Dorobantu (ICJ - Institut Camille Jordan [Villeurbanne] - ECL - École Centrale de Lyon - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - INSA Lyon - Institut National des Sciences Appliquées de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon) |
| Abstract: | In this paper, we study the pricing of life insurance portfolios in the presence of dependent lives. We assume that an insurer with an initial exposure to n mortality-contingent contracts wanted to acquire a second portfolio constituted of m individuals. The policyhold-ers' lifetimes in these portfolios are correlated with a Farlie-Gumbel-Morgenstern (FGM) copula, which induces a dependency between the two portfolios. In this setting, we compute the indifference price charged by the insurer endowed with an exponential utility. The optimal price is characterized as a solution to a backward differential equation (BSDE). The latter can be decomposed into (n − 1)n! auxiliary BSDEs. In this general case, the derivation of the indifference price is computationally infeasible. Therefore, while focusing on the example of death benefit contracts, we develop a model point based approach in order to ease the computation of the price. It consists on replacing each portfolio with a single policyholder that replicates some risk metrics of interest. Also, the two representative agents should adequately reproduce the observed dependency between the initial portfolios. |
| Keywords: | representative contract,indifference pricing, utility maximization, life insurance |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01258645&r=ias |
| By: | Elizabeth Weigensberg; Derekh Cornwell; Lindsey Leininger; Matthew Stagner; Sarah LeBarron; Jonathan Gellar; Sophie MacIntyre; Richard Chapman; Erin J. Maher; Peter J. Pecora; Kirk O’Brien |
| Abstract: | Mathematica and Casey Family Programs have published the final report from a project linking child welfare and Medicaid data to conduct analyses to understand types of high service use and to identify factors predictive of high service use among children in foster care. |
| Keywords: | superutilization, child welfare, Medicaid, foster care, data linking, predictive analytics |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:d2d45a94a86542ad9bc0af7d0fa7c98d&r=ias |
| By: | Elizabeth Weigensberg; Derekh Cornwell; Lindsey Leininger; Matthew Stagner; Sarah LeBarron; Jonathan Gellar; Sophie MacIntyre; Richard Chapman; Erin J. Maher; Peter J. Pecora; Kirk O’Brien |
| Abstract: | Mathematica and Casey Family Programs have published the final report from a project linking child welfare and Medicaid data to conduct analyses to understand types of high service use and to identify factors predictive of high service use among children in foster care. |
| Keywords: | superutilization, child welfare, Medicaid, foster care, data linking, predictive analytics |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:caaff77fa722452aa241ace4b218e353&r=ias |
| By: | Kamil Jod\'z |
| Abstract: | The EU Solvency II directive recommends insurance companies to pay more attention to the risk management methods. The sense of risk management is the ability to quantify risk and apply methods that reduce uncertainty. In life insurance, the risk is a consequence of the random variable describing the life expectancy. The article will present a proposal for stochastic mortality modeling based on the Lee and Carter methodology. The maximum likelihood method is often used to estimate parameters in mortality models. This method assumes that the population is homogeneous and the number of deaths has the Poisson distribution. The aim of this article is to change assumptions about the distribution of the number of deaths. The results indicate that the model can get a better match to historical data, when the number of deaths has a negative binomial distribution. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1803.11233&r=ias |
| By: | Sarah Croake; Jonathan D. Brown; Dean Miller; Nathan Darter; Milesh M. Patel; Junqing Liu; Sarah Hudson Scholle |
| Abstract: | This study examined whether characteristics of Medicaid beneficiaries were associated with receipt of follow-up care after discharge from the emergency department (ED) following a visit for mental or substance use disorders. |
| Keywords: | Medicaid beneficiaries, emergency department, Mental disorder, substance use disorder, health |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:f08df962a79f4b2fa21456e4b268c38c&r=ias |
| By: | Glenn Boyle (University of Canterbury); Roger Stover; Amrit Tiwana; Oleksandr Zhylyevskyy |
| Abstract: | Using a conjoint analysis of 417 finance professionals from six countries, we find no evidence that higher interest rates cause knowledgeable depositors to moderate their withdrawals during a banking crisis. In fact, intended withdrawals are positively correlated with expected interest rate changes. After accounting for endogeneity, this relationship disappears, consistent with the attractiveness of higher returns being offset by increased doubts about bank solvency. The withdrawal decisions of finance professionals are also independent of their personal characteristics, but they appear to place considerable store on deposit insurance generosity and the presence of a formal insurance fund. |
| Keywords: | Interest rates; deposit withdrawals; banking crisis; conjoint analysis |
| JEL: | G21 G28 |
| Date: | 2018–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:18/07&r=ias |
| By: | Cirelli, Fernando; Espino, Emilio; Sanchez, Juan M. (Federal Reserve Bank of St. Louis) |
| Abstract: | The benefits of implementing Unemployment Insurance Savings Accounts (UISAs) are studied in the presence of the multiple sources of information frictions often existing in developing countries. A benchmark incomplete markets economy is calibrated to Mexico in the early 2000s. The unconstrained optimal allocation would imply very large welfare gains relative to the benchmark economy (similar to an increase in consumption of 23% in every period). More importantly, in presence of multiple sources of information frictions, about half of those potential gains can be accrued through the implementation of UISAs with replacement rates between 40-50%, contribution rates between 10-15%, an initial liquidity transfer of about 20 quarters of average income, and higher payroll taxes to finance those initial stocks. |
| Keywords: | Unemployment Insurance; Informality; Moral Hazard; UISA. |
| JEL: | D82 H55 I38 J65 |
| Date: | 2018–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2018-006&r=ias |
| By: | Carmassi, Jacopo; Dobkowitz, Sonja; Evrard, Johanne; Parisi, Laura; Silva, André; Wedow, Michael |
| Abstract: | On 24 November 2015, the European Commission published a proposal to establish a European Deposit Insurance Scheme (EDIS). The proposal provides for the creation of a Deposit Insurance Fund (DIF) with a target size of 0.8% of covered deposits in the euro area and the progressive mutualisation of its resources until a fully-fledged scheme is introduced by 2024. This paper investigates the potential impact and appropriateness of several features of EDIS in the steady state. The main findings are the following: first, a fully-funded DIF would be sufficient to cover payouts even in a severe banking crisis. Second, risk-based contributions can and should internalise specificities of banks and banking systems. This would tackle moral hazard and facilitate moving forward with risk sharing measures towards the completion of the Banking Union in parallel with risk reduction measures; this approach would also be preferable to lowering the target level of the DIF to take into account banking system specificities. Third, smaller and larger banks would not excessively contribute to EDIS relative to the amount of covered deposits in their balance sheet. Fourth, there would be no unwarranted systematic cross-subsidisation within EDIS in the sense of some banking systems systematically contributing less than they would benefit from the DIF. This result holds also when country-specific shocks are simulated. Fifth, under a mixed deposit insurance scheme composed of national deposit insurance funds bearing the first burden and a European deposit insurance fund intervening only afterwards, cross-subsidisation would increase relative to a fully-fledged EDIS. The key drivers behind these results are: i) a significant risk-reduction in the banking system and increase in banks' loss-absorbing capacity in the aftermath of the global financial crisis; ii) a super priority for covered deposits, further contributing to protect EDIS; iii) an appropriate design of risk-based contributions, benchmarked at the euro area level, following a "polluter-pays" approach. JEL Classification: G21, G28 |
| Keywords: | cross-subsidisation, European Deposit Insurance Scheme (EDIS), risk-based contributions |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2018208&r=ias |
| By: | Dilek Pekdemir |
| Abstract: | The healthcare sector is expanding in the world in parallel to changing medical challenges, growing populations and also increasing number of senior citizens are creating higher demand for healthcare services. The Turkish healthcare market has also been shaping by the very same drivers and is expected to continue its growth with growing population and upsurge in healthcare spending. The healthcare providers are the Ministry of Health, universities and the private sector, with the Ministry accounting for two-thirds of country's hospitals in Turkey. A large majority of health infrastructure in Turkey is old and out of date and is no longer appropriate to meet healthcare needs considering large and increasing population. Furthermore, the budgetary pressures on the government is forcing to explore alternatives to traditional public sector provision. In response to the need for large capacity investments in healthcare systems, the Turkish government launched its Health PPP Program in 2010. The aim of the program is to develop new healthcare facilities and to improve service delivery. The government is also seeking private sector participation in the hospital infrastructure sector in Turkey. The Health PPP Program will consist of 50 projects with an estimated EUR 20 billion investment value. Around 15 projects under the Program are at various stages of tender, financing and construction. PPP is a common model to finance such public facilities in Turkey with various applications such as Build-Operate-Transfer, Build-Operate-Own or Transfer of Operation Rights. The Build-Lease-Transfer model was introduced into Turkish legislation in 2013, commonly known as the City Hospitals/Medical Campuses Law, and it was specifically introduced to support healthcare PPP's. Under the Build-Lease-Transfer model, the private sector finances and builds a facility and then leases it to the relevant public authority, with the state providing the public service. The infrastructure facility is leased for a maximum of 30 years and the public authority pays a lease fee to the private investor and operates the facility during the lease period. This paper is aimed to investigate the new financing model in healthcare facilities in Turkey. Turkey's medical campus programme, also known as hospital PPP's, has been one of the most discussed topics in the country's infrastructure sector and legal environment. The healthcare facilities projects are structured on a Build-Lease-Transfer model with strong demonstration effects for the rest of Turkey by promoting the use of PPP contracting, and demonstrating good practice in international PPP standards. This new financing model is attracting not only participation of Turkish private sector, but also international financing institutions, such as ICF and EBRD. |
| Keywords: | built-lease-transfer model; Healthcare; medical campus; Ppp; Turkey |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_306&r=ias |