nep-ias New Economics Papers
on Insurance Economics
Issue of 2018‒10‒22
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Index-based insurance of gross margin in agriculture – key challenges By Sulewski, Piotr; Was, Adam
  2. The ACA Medicaid Expansion in Michigan and Financial Health By Sarah Miller; Luojia Hu; Robert Kaestner; Bhashkar Mazumder; Ashley Wong
  3. Direct payments versus subsidized crop insurance in agriculture By Biernat-Jarka, Agnieszka; Pawlowska-Tyszko, Joanna
  4. Unemployment insurance union By Clemens, Marius; Claveres, Guillaume
  5. Increasing social insurance coverage in Viet Nam’s SMEs By Paulette Castel; Alexander Pick
  6. Does Crop Insurance Enrollment Exacerbate the Negative Effects of Extreme Heat? A Farm-level Analysis By Regmi, Madhav; Tack, Jesse B.
  7. Adaptation to Climate Change: the Role of Crop Insurance By Du, Xiaoxue; Ye, Fanglin
  8. Influence of Farm and Lease Type on Crop Insurance Returns By Sharma, Sankalp; Walters, Cory G.
  9. Risk Preferences and the Participation Pattern of Rainfall Index Insurance By Goodrich, Brittney K.; Yu, Jisang
  10. Family formation and demand for health insurance By Doiron, Denise; Kettlewell, Nathan
  11. Insurance Demand over Varying Coverage Levels: Experimental Evidence From China By Huo, Ran; Colson, Gregory J.
  12. Firm's Protection against Disasters: Are Investment and Insurance Substitutes or Complements? By Giuseppe Attanasi; Laura Concina; Caroline Kamate; Valentina Rotondi
  13. Unemployment Insurance, Strategic Unemployment and Firm-Worker Collusion By Bernardus Van Doornik; David Schoenherr; Janis Skrastins
  14. Deductibles and Health Care Utilization: An Experiment on the Role of Forward-Looking Behavior By Kairies-Schwarz, Nadja; Harrison, Glenn W.; Han, Johann
  15. Redistribution and Insurance in Welfare States around the World By Charlotte Bartels; Dirk Neumann
  16. The Ecological Insurance Trap By Kevin Berry; Eli P. Fenichel; Brian E Robinson

  1. By: Sulewski, Piotr; Was, Adam
    Abstract: The paper attempts at assessment of usefulness of the index-based insurance of gross margin compared to traditional production insurances. The analysis used FADN data and was limited to the example of winter wheat. The conducted simulations showed that the category of gross margin is characterized by higher variability than yields or prices, thus the costs of its insurance expressed as fair premium would be higher than the costs of traditional production insurance. However, the major problem in case of index-based insurances is still the basic risk related to the possibility that part of the insured will not receive compensation even though they incurred losses. The conducted analyses showed that the assumption of the index basing on the average drop in yields in a voivodeship would result in major percentage of errors as regards payment and refusal of payment of the compensation compared to individual insurance. Structuring of the system of index-based insurances would require collecting data – to construct indices – from areas of much smaller territorial coverage.
    Keywords: Agricultural Finance, Farm Management, Political Economy
    Date: 2018
  2. By: Sarah Miller; Luojia Hu; Robert Kaestner; Bhashkar Mazumder; Ashley Wong
    Abstract: This article examines the impact of the Affordable Care Act Medicaid expansion in Michigan, the Healthy Michigan Program (HMP), on the financial well-being of new Medicaid enrollees. Our analysis uses a dataset on credit reports matched to administrative data on HMP enrollment and use of health care services. We find that enrollment is associated with large improvements in several measures of financial health, including reductions in unpaid bills, medical bills, over limit credit card spending, delinquencies, and public records (such as evictions, judgments, and bankruptcies). These benefits are apparent across several subgroups, although individuals with greater medical need (such as those with chronic illnesses) experience the largest improvements.
    JEL: I1 I13 I18
    Date: 2018–09
  3. By: Biernat-Jarka, Agnieszka; Pawlowska-Tyszko, Joanna
    Abstract: The article presents types of subsidized crop insurance in agriculture. The purpose of the study was to discuss changes in the area of insured crops in 2009-2015 and to show the link between the introduction of the crop insurance law and the actual level of insurance contracts concluded by farmers. The study attempted to answer the question whether, the principle of compulsory insurance connected with the receipt of direct payments increased the interest of farmers in state-subsidized insurance. The article used data from Statistical Yearbooks of Central Statistical Office, reports of insurance companies submitted to the Ministry of Agriculture and Rural Development and FADN (Farm Accountancy Data Network). The analysis covered detailed FADN agricultural accounting data for 2009-2015.
    Keywords: Agricultural Finance, Crop Production/Industries, Farm Management
    Date: 2018
  4. By: Clemens, Marius; Claveres, Guillaume
    Abstract: A European unemployment insurance scheme has gained increased attention as a new and ambitious common fiscal instrument which could be used for temporary cross-country transfers. Part of the national stabilizers composing unemployment insurance schemes would be transferred to the central level. Unemployed are then insured by both layers. When a country is hit by an asymmetric shock, it would receive positive net transfers from the central fund in the form of reduced taxes and increased benefits, providing risk-sharing for the whole union. We build a two-country DSGE model with supply, demand and labor market shocks in order to capture the recent national insurance system and the unemployment insurance union (UIU) design. The model is calibrated to the euro area core and periphery data and matches the empirically observed cyclicality of the net replacement rate, the wage and unemployment dynamics. This baseline scenario is then compared to an optimal unemployment insurance union with passive and active benefit policies. For all underlying shocks, we find that the UIU reduces the fluctuation of consumption and unemployment while it increases the fluctuations of the trade balance. In case of a positive domestic government spending shock the UIU reduces the negative crowding out effect on private consumption and investment. The model will be used to analyze the effects of national and supranational benefit policies on labour market patterns and welfare.
    Keywords: Unemployment insurance,search and matching,fiscal union
    JEL: E32 E61 J65
    Date: 2018
  5. By: Paulette Castel; Alexander Pick
    Abstract: Viet Nam has made significant progress in expanding social insurance coverage in recent years. However, coverage amongst small and medium-sized enterprises (SMEs) remains very low and very few workers in this sector are expected to receive a pension in retirement. Drawing on two datasets for SMEs in Viet Nam, this paper seeks to explain this phenomenon by examining the characteristics of enterprises that are enrolled and those that opt out, and it identifies possible barriers to enrolment, such as high contribution rates. It also examines how enforcement mechanisms and formalisation policies might deter enterprises from enrolling. Drawing on lessons from international experience, the paper recommends a series of policy responses that seek both to address these barriers and to protect the livelihoods of those workers who are not yet covered.
    Keywords: formalisation, minimum wage, SMEs, social insurance, social protection, Viet Nam
    JEL: H24 H55 I38 J32
    Date: 2018–10–19
  6. By: Regmi, Madhav; Tack, Jesse B.
    Keywords: Risk and Uncertainty, Food and Agricultural Policy Analysis, Production Economics
    Date: 2018–06–20
  7. By: Du, Xiaoxue; Ye, Fanglin
    Keywords: Productivity Analysis and Emerging Technologies, Resource and Environmental Policy Analysis, Risk and Uncertainty
    Date: 2018–06–20
  8. By: Sharma, Sankalp; Walters, Cory G.
    Keywords: Food and Agricultural Policy Analysis, Behavioral & Institutional Economics, Risk and Uncertainty
    Date: 2018–06–20
  9. By: Goodrich, Brittney K.; Yu, Jisang
    Keywords: Food and Agricultural Policy Analysis, Risk and Uncertainty, Ag Finance and Farm Management
    Date: 2018–06–20
  10. By: Doiron, Denise; Kettlewell, Nathan
    Abstract: We study how demand for health insurance responds to family formation using a unique panel of young Australian women. Our data allow us to simultaneously control for the influence of state dependence and unobserved heterogeneity as well as detailed information on children and child aspirations. We fi nd evidence that women purchase insurance in preparation for pregnancy but then transition out of insurance once they have fi nished family building. Children have a large, negative impact on demand for insurance, although this effect is smaller for those on higher incomes. We also fi nd that state dependence has a large impact on insurance demand. Our results are robust to a variety of alternative modelling strategies.
    Date: 2018–10
  11. By: Huo, Ran; Colson, Gregory J.
    Keywords: Risk and Uncertainty, Experimental Economics, Ag Finance and Farm Management
    Date: 2018–06–20
  12. By: Giuseppe Attanasi (Université Côte d'Azur, CNRS, GREDEG, France); Laura Concina (FONCSI, Toulouse); Caroline Kamate (FONCSI, Toulouse); Valentina Rotondi (Bocconi University, Milan)
    Abstract: We use a controlled laboratory experiment to study firm's and insurer's behavior when the firm can protect itself against potential technological damages. The probability of a catastrophic event is objective, and the firm's costly investment in safety reduces it. The firm can also buy an insurance with full or partial refund against the consequences of the catastrophic event, which ultimately reduces the variance of the firm's investment-in-safety lottery. In the insurer-firm game, first the insurer decides which contract to propose to the firm, then the firm simultaneously decides whether or not to buy this contract and whether or not to invest in the reduction of the probability of the catastrophic events. We parametrize the insurer-firm game such that: (i) a risk-neutral insurer maximizes his expected profit by o↵ering an actuarially fair contract with full insurance; (ii) a risk-neutral firm is indi↵erent between investing in safety and accepting a fair insurance contract. We aim at understanding whether investment in safety and insurance are substitutes or complements in the firm's risk management of catastrophic events. In line with our predictions, the experimental results suggest that they are substitutes rather than complements: the firm's investment in safety measures is a↵ected by the insurer's proposed contract, the latter usually involving only partial insurance.
    Keywords: Decision under risk, Losses, Small probabilities, Probability reduction, Technological disasters, Insurance, Deductible
    JEL: D81 G22 K32 Q58
    Date: 2018
  13. By: Bernardus Van Doornik; David Schoenherr; Janis Skrastins
    Abstract: Recent years have seen a spread of unemployment insurance (UI) programs to mid-income and developing countries. Yet little is known about how labor market characteristics in these countries, for example large informal labor markets, interact with the incentive effects of UI. In this paper, we show that firms and workers collude to extract rents from the UI system in the presence of large informal labor markets. Exploiting a discontinuous effect of an unemployment insurance reform in Brazil, we document layoff and rehiring patterns consistent with collusion between firms and workers to extract rents from the UI system. Firms and workers time formal unemployment spells to coincide with workers' eligibility for UI benefits. Survey evidence suggests that firms employ workers informally while they are eligible for UI benefits and rehire them when benefits end. Combined with a lower probability of hiring replacement workers when laying off workers eligible for UI benefits, this suggests that firms employ workers informally while they are on benefits. Firms and workers share the rents extracted from the UI system through lower equilibrium wages. All the observed patterns are mostly driven by industries and municipalities with large informal labor markets. Our findings thus suggest that optimal UI design in mid-income and developing countries needs to take into account adverse incentive effects generated by collusion between firms and workers in the presence of informal labor markets
    Date: 2018–09
  14. By: Kairies-Schwarz, Nadja; Harrison, Glenn W.; Han, Johann
    Abstract: Recent evidence on nonlinear insurance contracts finds that individuals react to the embedded dynamic incentives by changing health care utilization. However, with field data it is difficult to keep the spot price among individuals constant while systematically varying the future price. To do so, we use a controlled laboratory experiment in which subjects are insured by a health plan with a deductible and go through a cycle of periods. In each period they face probabilistic health events and have to choose whether to seek treatment or not. We vary the likelihood of hitting the deductible by varying the number of periods and the height of the deductible, as well as controlling whether subjects receive regular information updates on their remaining deductible. We also elicit individual risk and time preferences. Our results show that varying the future price has a significant effect on spending behavior, regardless of whether the same future price is reached by changing the deductible or the number of periods. At an individual level, we identify perfectly forward-looking as well as perfectly myopic individuals. We find that a relationship between spending on health care and risk preferences, forward-looking behavior and giving information on the height of the deductible.
    Keywords: Health insurance,nonlinear prices,forward-looking behavior,laboratory experiment,risk and time preferences.
    JEL: I13 C91
    Date: 2018
  15. By: Charlotte Bartels; Dirk Neumann
    Abstract: Redistribution across individuals in a one-year-period framework is an empirically intensely studied question. However, a substantial share of annual redistribution might turn out to serve individual insurance in a longer perspective. In particular, public pensions, that smooth incomes over the life-cycle and are funded by high taxes, play an increasingly important role in welfare states with aging societies. This paper investigates to what extent long-run redistribution diverges from annual redistribution in welfare states of different types. Exploiting panel data from the Cross-National Equivalent File (CNEF) for Australia, Germany, Korea, Switzerland, the United Kingdom and the United States, we find that supposedly highly redistributive welfare states like Germany provoke comparably less redistribution between individuals in the long-run than the United Kingdom or the United States. Regression results show that a higher share of elderly is associated with higher annual redistribution, but with less long-run redistribution between individuals.
    Keywords: Welfare states, redistribution, insurance
    JEL: D31 D63 H53 H55 I38
    Date: 2018
  16. By: Kevin Berry (Institute of Social and Economic Reesarch, Department of Economics, University of Alaska Anchorage); Eli P. Fenichel (School of Forestry and Environmental Studies, Yale University); Brian E Robinson (Department of Geography, McGill University)
    Abstract: Common pool resources often insure individual livelihoods against the collapse of private endeavors. When endeavors based on private and common pool resources are interconnected, investment in one may put the other at risk. We model Senegalese pastoralists who choose whether to grow crops, a private activity, or raise livestock on common pool pastureland. Livestock can increase the likelihood of locust outbreaks via ecological processes related to grassland degradation. Locust outbreaks damage crops, but not livestock, which are used for savings and insurance. We show the incentive to self-protect (reduce grazing pressure) or self-insure (increase livestock levels) changes with various property rights schemes and levels of ecological detail. If the common pool nature of insurance exacerbates the ecological externality even fully-informed individuals may make decisions that increase the probability of catastrophe, creating an “insurance trap.”
    Keywords: Environmental externality, common pool resources, poverty trap, endogenous risk
    JEL: Q20 Q54 Q57
    Date: 2018–08

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