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on Insurance Economics |
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Issue of 2018‒07‒30
ten papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Jean-Marc Bourgeon (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech, Département d'Économie de l'École Polytechnique - X - École polytechnique); Pierre Picard (X - École polytechnique) |
| Abstract: | Under moral hazard, most insurance contracts are incomplete, to the extent that they condition the coverage neither on the contingencies under which policyholders choose their behavior, nor on the circumstances of the loss. This incompleteness can be explained by underwriting and auditing costs borne by insurers, by policyholders cognitive costs, and by the limits of market regulation. It opens the door to controversies and disputes between insured and insurer. In this context, we analyze how insurance law can mitigate moral hazard, by allowing insurers to cut indemnities in some circumstances, while preventing them from excessive nitpicking. We also highlight conditions under which the burden of proof should be on the policyholders, provided that insurers are threatened by bad faith penalties. |
| Keywords: | incomplete contracts,moral hazard,insurance |
| Date: | 2018–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01830360&r=ias |
| By: | Petri, Böckerman; Ohto, Kanninen; Ilpo, Suoniemi |
| Abstract: | We exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate. Elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness. We use comprehensive administrative data and a kink in the policy rule near the median earnings. We find a statistically significant estimate of the elasticity of the order of one. |
| Keywords: | Sick pay, labor supply, sickness absence, regression kink design, social insurance |
| JEL: | H55 I13 J22 |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:87499&r=ias |
| By: | M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud |
| Abstract: | This paper reports survey evidence on long-term care (LTC) risk misperceptions and demand for long-term care insurance (LTCI) in Canada. LTC risk misperceptions is divided into three different risks: needing help for at least one activity of daily life, needing access to a nursing home, and living to be 85 years old. We contrast subjective (i.e. stated) probabilities with actual probabilities for these three dimensions. We first provide descriptive statistics of how objective and subjective probabilities differ and correlate to each other. Second, we study cross-correlations between different types of risks. We then study how risk misperceptions correlate with individual characteristics, and evaluate how misperceptions affect intentions and actual purchase of LTCI. Our conclusions are two-fold. First, we find that most subjects are not well informed about their individual LTC risks, making it difficult for them to take the correct LTCI decisions. Second, and even though misperceptions explain an individuals actual or his intentions to take-up LTCI, misperceptions are unlikely to explain the poor take-up rate of LTCI in our sample. |
| Keywords: | Long-term care insurance puzzle, disability, misperceptions, subjective probability |
| JEL: | D91 I13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:criacr:1805&r=ias |
| By: | M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud |
| Abstract: | We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers. |
| Keywords: | Long-term care puzzle; Risk perceptions; Supply and demand of insurance, Government programs |
| JEL: | G02 G12 C14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:criacr:1804&r=ias |
| By: | Christensen, Jens H. E. (Federal Reserve Bank of San Francisco); Lopez, Jose A. (Federal Reserve Bank of San Francisco); Mussche, Paul (Federal Reserve Bank of San Francisco) |
| Abstract: | Insurance companies and pension funds have liabilities far into the future and typically well beyond the longest maturity bonds trading in fixed-income markets. Such long-lived liabilities still need to be discounted, and yield curve extrapolations based on the information in observed yields can be used. We use dynamic Nelson-Siegel (DNS) yield curve models for extrapolating risk-free yield curves for Switzerland, Canada, France, and the U.S. We find slight biases in extrapolated long bond yields of a few basis points. In addition, the DNS model allows the generation of useful financial risk metrics, such as ranges of possible yield outcomes over projection horizons commonly used for stress-testing purposes. Therefore, we recommend using DNS models as a simple tool for generating extrapolated yields for long-term interest rate risk management. |
| JEL: | E43 E47 G12 G22 G28 |
| Date: | 2018–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2018-09&r=ias |
| By: | Raquel Fonseca; Pierre-Carl Michaud; Arie Kapteyn; Titus Galama |
| Abstract: | We estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36.3% of the rise in health spending (technology 31.5% and insurance 4.8%), while income explains only 4.4%. By simultaneously occurring over this period, these changes may have led to complementarity effects which explain an additional 59% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health-care productivity at an annual rate of 1.7%, explains almost all of the rise in life expectancy at age 25 over this period. Welfare gains are substantial and most of the gain appears to be due to technological change (47% out of a total gain of 67%). |
| Keywords: | health spending, longevity, life-cycle models, technological change |
| JEL: | I10 I38 J26 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:criacr:1806&r=ias |
| By: | Cremades, R.; Surminski, Swenja; Máñez Costa, M.; Hudson, P.; Shrivastava, P.; Gascoigne, J. |
| Abstract: | Assessing the dynamics of resilience could help insurers and governments reduce the costs of climate-risk insurance schemes and secure future insurability in the face of an increase in extreme hydro-meteorological events related to climate change. |
| JEL: | G32 |
| Date: | 2018–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:86505&r=ias |
| By: | Fleitas, Sebastián |
| Abstract: | Increased competition may lead to incentives for firms to increase quality by incorporating higher quality inputs. This is particularly relevant in health care markets, since the supply of high quality physicians is relatively inelastic in the short run. Therefore, an increase in the relative demand for high-quality physicians could lead to an increase in their relative wages without increasing their total hours of work. Using a policy change in the Uruguayan health care system, I assess the effects of increased competition via lock-in reductions on a market for inputs. I leverage the facts that insurance companies, hospitals and physician services are completely vertically integrated in Uruguay and that in 2009 the government generated an exogenous change in the regulated mobility regime, increasing the competition in the market and providing incentives to increase quality. I combine administrative records on wages and hours of work in all hospitals for all specialists with data on the scores that specialists obtained in the test they must take to be admitted into the medical specialty graduate school, which I use as an exogenous measure of their quality. Consistent with the idea of an inelastic relative supply in the short run, I show that the increased competition shifted the relative demand for high-quality medical specialists, increasing the returns to skill. I do not find strong evidence of an increase in quality, approximated as relative hours of high-skill versus low-skill physicians |
| Keywords: | Medición de impacto, Salud, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1161&r=ias |
| By: | Jiri Prochazka (University of Economics, Prague); Matej Camaj (University of Economics, Prague) |
| Abstract: | The main aim of the presentation is to discuss methods which can be used for modelling the number of daily road accidents of uninsured drivers and their claim severity i.e. the average claim per accident. Modelling of such events is relevant for institutions such as the insurance companies, national insurers? bureau etc. The proposed model consists of three parts. The first part models deterministic seasonality with special focus given on daily seasonality. Daily seasonality is usually considered as seasonality with long seasonal period, so we will use approaches based on basis expansion. The second part characterizes the impact of other deterministic variables such as long-term trend and other external variables. The last part of the model is an error term part the purpose of which is to capture residual randomness of the model. Because of the character of the time series, GARMA model will be used to capture the error term part. |
| Keywords: | road accidents; long seasonal period modelling; basis expansion; GARMA models |
| JEL: | C53 G22 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5408040&r=ias |
| By: | MuLin Jeong (Inje University); HeyKyung Park (Inje University) |
| Abstract: | Rapid graying made the Korean government has enforced the Long-term care insurance in 2008 and related elderly nursing homes are ever increasing since.The elderly nursing homes in Korea are focusing on quality rather than quantity, especially environmental supports.Color environment design is one of the quality elements that improve the services of the nursing homes as well as the satisfaction of its residents. Therefore, reasonable planning will only be available after the element is studied.The purpose of this research is to understand elderly consciousness on the nursing homes and their color preferences in order to provide baseline data for elderly nursing home plans. |
| Keywords: | nursing home / elderly / color preference |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5408005&r=ias |