nep-ias New Economics Papers
on Insurance Economics
Issue of 2019‒05‒27
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Job displacement insurance and (the lack of) consumption-smoothing By Francois Gerard; Joana Naritomi
  2. Targeting Disability Insurance Applications with Screening By Mathilde Godard; Pierre Koning; Maarten Lindeboom
  3. Unemployment Dynamics and Endogenous Unemployment Insurance Extensions By W. Similan Rujiwattanapong
  4. Potential Effects of Climate Change on Insurance Demand for Agricultural Activities in Nigeria By Elum, Z.A.; Ndubueze-Ogaraku, M.E.
  5. Strengthening insurance partnerships in the face of climate change: insights from an agent-based model of flood insurance in the UK By Crick, Florence; Jenkins, Katie; Surminski, Swenja
  6. Being in good hands: Deposit insurance and peers financial sophistication By Francesco Caloia; Mauro Mastrogiacomo; Giacomo Pasini
  7. Republic of Poland; Financial Sector Assessment Program-Technical Note-Insurance Sector Regulation and Supervision By International Monetary Fund
  8. La rentabilité technique des organismes d’assurance non-vie en 2017 By Frédéric Ahado; Laure Chantrelle; Elodie Ferrand-Ténot
  9. Hospital Competition in the Netherlands : An Empirical Investigation By Berden, Carolien; Croes, R.; Kemp, R.; Mikkers, Misja; van der Noll, Rob; Shestalova, V.; Svitak, Jan
  10. Partners HealthCare ACO and the Three-Day Rule Waiver: Implementation Approach and Lessons Learned By Sonya Streeter
  11. Henry Ford Accountable Care Organization’s Beneficiary Engagement Strategy By Natalie Graves; Sonya Streeter

  1. By: Francois Gerard; Joana Naritomi
    Abstract: The most common forms of government-mandated job displacement insurance are Severance Pay (SP; lump-sum payments at layoff) and Unemployment Insurance (UI; periodic payments contingent on non-employment). While there is a vast literature on UI, SP programs have received much less attention, even though they are prevalent across countries and predominant in developing countries. In particular, little is known about their insurance value, which critically relies on workers’ ability to dissave the lump-sum progressively to smooth consumption after layoff. Using de-identified high-frequency expenditure data and matched employee-employer data from Brazil, we find that displaced workers eligible for both UI and SP increase consumption at layoff by 35% despite experiencing a 17% consumption loss after they stop receiving any benefits. Moreover, this sensitivity of consumer spending to cash-on-hand is present across spending categories and sources of variation in UI benefits and SP amounts. We show that a simple structural model with present-biased workers can rationalize our findings, and we use it to illustrate their implications for the incentive-insurance trade-off between SP and UI. Specifically, the insurance value of SP programs – or of other policies that provide liquidity to workers at layoff – can be severely reduced when consumption is over-sensitive to the timing of benefit disbursement, undermining their advantage in terms of job-search incentives. Our findings highlight the importance of the difference between SP and UI in their disbursement policy, and shed new light on the need for job displacement insurance in a developing country context.
    Keywords: unemployment insurance, severance pay, consumption, Brazil
    JEL: E21 E26 J65
    Date: 2019
  2. By: Mathilde Godard (University of Lyon); Pierre Koning (Vrije Universiteit Amsterdam); Maarten Lindeboom (Vrije Universiteit Amsterdam)
    Abstract: We examine the targeting effects of increased scrutiny in the screening of Disability Insurance (DI) applications using exogenous variation in screening induced by a policy reform. The reform raised DI application costs and revealed more information about the true disability status of applicants at the point of the award decision. We use administrative data on DI claims and awards and merge these with other administrative data on hospitalization, mortality and labor market outcomes. Regression Discontinuity in Time (RDiT) regressions show substantial declines in DI application rates and changes in the composition of the pool of applicants. We find that the health of those who are not discouraged from applying is worse than those who are. This suggests that the pool of applicants becomes more deserving. At the same time, compared with those who did not apply under the old system of more lax screening, those who are discouraged from applying are in worse health, have substantially lower earnings and are more often unemployed. This indicates that there are spillovers of the DI reform to other social insurance programs. As we do not find additional screening effects on health at the point of the award decision, we conclude that changes in the health condition of the pool of awarded applicants are fully driven by self-screening of (potential) applicants.
    Keywords: Disability Insurance, Screening, Composition effects, Targeting efficiency
    JEL: H2 I3
    Date: 2019–05–17
  3. By: W. Similan Rujiwattanapong (Aarhus Universitet; Centre for Macroeconomics (CFM))
    Abstract: This paper investigates the impact of endogenous unemployment insurance (UI) extensions on the dynamics of unemployment and its duration structure in the US. Using a search and matching model with worker heterogeneity, I allow for the maximum UI duration to depend on unemployment and for UI benefits to depend on worker characteristics. UI extensions have a large effect on long-term unemployment during the Great Recession via job search responses and a moderate effect on total unemployment via job separations. Disregarding rational expectations about the timing of UI extensions implies an overestimation of the unemployment rate by over 2 percentage points.
    Keywords: Business cycles, Long-term unemployment, unemployment insurance, Unemployment duration, Rational expectations
    JEL: E24 E32 J24 J64 J65
    Date: 2019–05
  4. By: Elum, Z.A.; Ndubueze-Ogaraku, M.E.
    Keywords: Risk and Uncertainty
    Date: 2017–10
  5. By: Crick, Florence; Jenkins, Katie; Surminski, Swenja
    Abstract: Multisectoral partnerships are increasingly cited as a mechanism to deliver and improve disaster risk management. Yet, partnerships are not a panacea and more research is required to understand the role that they can play in disaster risk management and particularly disaster risk reduction. This paper investigates how partnerships can incentivise flood risk reduction by focusing on the UK public-private partnership on flood insurance. Developing the right flood insurance arrangements to incentivise flood risk reduction and adaptation to climate change is a key challenge. In the face of rising flood risks due to climate change and socio-economic development insurance partnerships can no longer afford to focus only on the risk transfer function. However, while expectations of the insurance industry have traditionally been high when it comes to flood risk management, the insurance industry alone will not provide the solution to the challenge of rising risks. The case of flood insurance in the UK illustrates this: even national government and industry together cannot fully address these risks and other actors need to be involved to create strong incentives for risk reduction. Using an agent-based model focused on surface water flood risk in London we analyse how other partners could strengthen the insurance partnership by reducing flood risk and thus helping to maintain affordable insurance premiums. Our findings are relevant for wider discussions on the potential of insurance schemes to incentivise flood risk management and climate adaptation in the UK and also internationally.
    Keywords: partnerships; insurance; climate change; surface water flood risk; ES/K006576/1
    JEL: E6
    Date: 2018–09–15
  6. By: Francesco Caloia; Mauro Mastrogiacomo; Giacomo Pasini
    Abstract: We study the effect on savings of the Deposit Guarantee Scheme (DGS) reform in the Netherlands. We study savings allocation in a DGS environment and we empirically investigate how bank accounts allocations of the Dutch households changed as a response to the reform. Moreover, we highlight the indirect effect on consumption and stock market investments and the role of peers in influencing people's financial decisions. We find evidence of bunching behavior at the insurance limit. Results indicate a general positive impact on saving amounts, with heterogeneous effects depending on relative peers' financial sophistication: people with unsophisticated peers tend to save more as a response to the reform, while people with sophisticated peers tend to save more cautiously.
    Keywords: Savings; Deposit Insurance; Peer Effects
    JEL: G18 D14
    Date: 2019–05
  7. By: International Monetary Fund
    Abstract: This technical note provides an update and an assessment of the development of regulation and supervision of the Polish insurance sector since an assessment concluded in 2012. The note is part of the Poland 2018 Financial Sector Assessment Program (FSAP) and draws on discussions in Poland from January 8 to 20 and May 8 to 21, 2018. Most recommendations of the 2012 FSAP insurance assessment have been implemented. The current FSAP did not carry out a detailed assessment of compliance with the IAIS Insurance Core Principles (ICPs). Nonetheless, it is clear that implementation of the EU Solvency II Directive in 2016 has significantly strengthened regulation and supervision, introducing risk-based capital standards, comprehensive insurance group supervision, and new requirements on the suitability of key persons, risk management, and controls. The supervision of intermediaries has also been strengthened in line with a 2012 FSAP recommendation, and further improvements were to take effect in late 2018. Unlike in many EU countries, Solvency II was implemented without significant increases in staff numbers.
    Date: 2019–05–09
  8. By: Frédéric Ahado; Laure Chantrelle; Elodie Ferrand-Ténot
    Abstract: Les organismes d’assurance non-vie en France dégagent en 2017 un résultat technique global de 4,2 milliards d’euros pour 66,9 milliards d’euros de primes acquises. La bonne tenue du marché de l’assurance non-vie passe non seulement par un chiffre d’affaires en augmentation en 2017 de 2,3% mais également par des charges d’acquisition et de gestion nettes qui se maintiennent à 23% des primes. Ainsi, le ratio combiné1 de l’ensemble du secteur, toutes branches d’activité confondues, s’élève en 2017 à 97%. Les principales branches d’assurance - dommages corporels, assurance automobile, assurance de biens et responsabilité civile - affichent un résultat technique positif qui s’élève à 3,3 milliards d’euros. Il existe cependant un déséquilibre structurel en assurances de dommages corporels entre les contrats individuels affichant un résultat de 1,1 milliard d’euros et les contrats collectifs sur lesquels aucun excédent technique n’est dégagé. Bien que l’assurance automobile - dommages et responsabilité civile - centralise presque un tiers de l’ensemble des primes, le résultat technique ne s’élève qu’à 534 M€ sur ce segment très concurrentiel. Enfin, les assurances de dommages aux biens et de responsabilité civile réalisent respectivement un résultat technique de l’ordre de 1,3 milliard d’euros et 0,4 milliard d’euros. Certaines branches d’activités font figure d’exception. En particulier, le résultat des garanties catastrophes naturelles reste affecté par les événements climatiques d’une année 2017 marquée par une sécheresse exceptionnelle et des cyclones particulièrement violents dans les Antilles. Ainsi, le montant des prestations augmente fortement (+136%) en 2017. Le volume des primes progresse de 3,5%. Le ratio combiné de cette branche d’activité passe ainsi de 98% en 2016 à 200% en 2017. Les mécanismes de transfert de risques ont cependant fonctionné puisque le solde de réassurance de cette branche devient positif en 2017 (en hausse de 186%).
    Keywords: assurance non-vie, primes, solde de souscription, solde financier, solde de réassurance, prestations, frais, provision pour sinistres à payer, provision pour primes non acquises, provision d’égalisation, résultat technique
    JEL: G22
    Date: 2019
  9. By: Berden, Carolien; Croes, R.; Kemp, R.; Mikkers, Misja (Tilburg University, Center For Economic Research); van der Noll, Rob; Shestalova, V. (Tilburg University, Center For Economic Research); Svitak, Jan (Tilburg University, Center For Economic Research)
    Abstract: The Dutch government introduced managed competition to the health care sec- tor in 2006. In this regulatory framework insurers compete for enrollees and providers compete for contracts with insurers. The resulting contracts are de- termined by bargaining, which outcome depends on the relative position of the provider. In this paper, we compare how commonly used market power indi- cators predict bargaining outcomes. We combine 2013 transaction data with bilateral contract data. Our empirical models explain the relative dierences in hospitals' revenues while controlling for dierences in the complexity of patients. Four indicators are used: the logit competition index (LOCI), willingness-to-pay (WTP), Elzinga-Hogarty market share and a rule-of-thumb market share. We nd that WTP and LOCI perform best empirically.
    Keywords: hospital competition; market power; bargaining
    JEL: I11 L44 L13 D22
    Date: 2019
  10. By: Sonya Streeter
    Abstract: This case study describes how Partners HealthCare’s Accountable Care Organization (ACO), a large integrated delivery system participating in the Next Generation ACO (NGACO) Model, implemented the skilled nursing facility (SNF) three-day rule waiver.
    Keywords: SNF 3-day waiver, benefit enhancements, ACOs, accountable care
    JEL: I
  11. By: Natalie Graves; Sonya Streeter
    Abstract: This case study describes the two-part strategy the Henry Ford Accountable Care Organization (HFACO) used to engage beneficiaries in the ACO.
    Keywords: Beneficiary engagement, patient engagement, ACO, Henry Ford
    JEL: I

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