nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒01‒20
thirteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Did th Massachusetts Health Reform Program Increase Self-Employment? By Debdeep Chattopadhyay
  2. Financial Consequences of Health Insurance: Evidence from the ACA’s Dependent Coverage Mandate By Nathan Blascak; Vyacheslav Mikhed
  3. Complementing Tax-financed Long-term Care with Private Insurance By Määttänen, Niku; Valkonen, Tarmo
  4. Pergulatan Asuransi Syariah di Indonesia By Nizar, Muhammad Afdi
  5. Insurable Losses, Pre-filled Claims Forms and Honesty in Reforming By William Morrison; Bradley J. Ruffle
  6. The Impact of Internal Factor Analysis Summary (IFAS) and Competing Power on Performance in the Life Insurance Industry: The Mediating Role of Competitive Advantage By Dewi, Ratna; Mahmud, Amir; Jamali, Hisnol
  7. Long-run effects of health shocks in a highly regulated labour market By Belloni, Michele; Simonetti, Irene; Zantomio, Francesca
  8. The Optimal Dynamic Reinsurance Strategies in Multidimensional Portfolio By Khaled Masoumifard; Mohammad Zokaei
  9. Safety at Sea during the Industrial Revolution By Kelly, Morgan; Gráda, Cormac Ó; Solar, Peter
  10. Pay-As-You-Drive Insurance Pricing Model By Safoora Zarei; Ali R. Fallahi
  11. Testing identifying assumptions in fuzzy regression discontinuity designs By Yoichi Arai; Yu-Chin Hsu; Toru Kitagawa; Ismael Mourifié; Yuanyuan Wan
  12. Corporate Governance Analysis on Risk Exposure and Performance of AIA Bhd. By Annathurai, Anusha
  13. Scrapping the entitlement to unemployment benefits for young labor market entrants : An effective way to get them to work ? By Bart Cockx; Koen Declercq; Muriel Dejemeppe; Leda Inga; Bruno Van der Linden

  1. By: Debdeep Chattopadhyay (DSEA, University of Padova)
    Abstract: By providing affordable health insurance untied from employer provision, the Massachusetts Health Reform Program could increase self-employment. Previous studies have estimated both positive and negative effects of the reform on aggregate self-employment using difference-in-differences designs. In this study, I use the synthetic control methodology to confirm the absence of a statistically significant effect of the reform on aggregate self-employment. However, I do detect positive and significant short-run effects of the reform on the probability that individuals become incorporated self-employed. This effect is restricted to individuals 40 years old or younger. I also find that for employees in this age range the reform caused a significant wage reduction. This finding highlights that the higher reform-mandated health insurance coverage was at least in part financed by employees.
    Keywords: Health Insurance, Self-Employment, Synthetic Control, Randomization Inference, Massachusetts Health Care Reform
    JEL: I11 I13 J18
    Date: 2020–01
  2. By: Nathan Blascak; Vyacheslav Mikhed (Federal Reserve Bank of Philadelphia)
    Abstract: We study the financial effects of health insurance for young adults using the Affordable Care Act’s dependent coverage mandate as a source of exogenous variation. Using nationally repre-sentative, anonymized credit report and publicly available survey data on medical expenditures, we exploit the mandate’s implementation in 2010 and its automatic disenrollment mechanism at age 26. Our estimates show that increasing access to health insurance lowered young adults’ out-of-pocket medical expenditures, debt in third-party collections, and the probability of per-sonal bankruptcy. However, most improvements in financial outcomes are transitory, as they diminish after an individual ages out of the mandate at age 26.
    Keywords: health insurance; consumer credit; financial outcomes; Affordable Care Act
    JEL: D14 I13 I18
    Date: 2019–12–17
  3. By: Määttänen, Niku; Valkonen, Tarmo
    Abstract: Abstract Many elderly people in Finland could increase they standard of living and receive more freedom of choice regarding long-term care by releasing part of their housing equity. The possibility to purchase reasonably priced life annuities and long-term care insurance would increase the benefits of housing equity release. However, there is virtually no market for such insurance in Finland. This report illustrates the benefits of life annuities and long-term care insurance, provides example of actuarially fair insurance pricing, and describes the conditions for this market to emerge. It argues that the government should support the emergence of an insurance market by clarifying the public welfare promise related to old age care and by promising not to seize private pension and long-term care insurance payouts e.g. via higher user fees for publicly provided long-term care.
    Keywords: Long-term care insurance, Life annuities, Ageing
    JEL: H24 G22
    Date: 2020–01–15
  4. By: Nizar, Muhammad Afdi
    Abstract: This paper aims to examine the struggle for shari'ah insurance in Indonesia. By using a qualitative-descriptive approach and time series data in the period 2010 - 2017, it is known that the struggle for sharia insurance in the national insurance market is indeed not easy. This is indicated in a number of indicators, namely (i) minimal regulatory and regulatory support; (ii) institutional support indicated by the relatively small number of insurance companies; (iii) asset development, although the growth is quite high, the value is still far below conventional insurance assets; (iii) ability to fulfill claims from Islamic insurance contribution funds is still low; (iv) with a limited portfolio choice, sharia insurance investments are still profitable (profitable investments); and (v) sharia insurance density and penetration are still far below conventional insurance. Shari'ah insurance struggle in the future is certainly more difficult because it must be able to win the opportunities that exist amid various challenges that also accompany it.
    Keywords: conventional insurance, investment fund, risk fund, gharar, maysir, riba, takaful, ta’awun
    JEL: A13 C81 G22 G28 G32
    Date: 2018–11–30
  5. By: William Morrison; Bradley J. Ruffle
    Abstract: We design a series of laboratory experiments to investigate the effects of purchasing insurance and of pre-filled claim forms on dishonesty in loss reporting. In our experiment, participants report the outcome of privately rolling two dice where the numbers rolled map to a payoff distribution with the possibility of losses in earned income. Prior to this reporting task, participants bid for a limited number of insurance contracts which issue an indemnity payment equal to each insured individual’s reported loss. We find that dishonest reporting is significantly more prevalent among insured individuals relative to the uninsured, consistent with an ‘entitlement bias’. Further we find that prefilling the reporting form with the most probable outcome only modestly constrains dishonest reporting among both insured and uninsured individuals. We explore reasons why pre-filled forms should be applied with caution.
    Keywords: experimental economics; pre-filled forms; pre-populated fields; insurance; dishonesty; claim build-up
    JEL: C91 D82 G22
    Date: 2020–01
  6. By: Dewi, Ratna; Mahmud, Amir; Jamali, Hisnol
    Abstract: This research aim to test and analyze the impact of internal factor analysis summary (IFAS) and competing power on performance in the life insurance industry in Makassar (Indonesia): The mediating role of competitive advantage. This study uses 60 employees of insurance companies at the manager level. Path analysis results provide evidence that the internal factor analysis summary (IFAS) and competitiveness significantly influence the competitive advantage and performance in the life insurance industry. The role of competitive advantage proved able to mediate the effect of internal factor analysis summary (IFAS) in improving the performance in the life insurance industry. The different conditions with competitive advantages that cannot increase the competing power against performance in the life insurance industry
    Date: 2018–09–21
  7. By: Belloni, Michele; Simonetti, Irene; Zantomio, Francesca (University of Turin)
    Abstract: Based on administrative data covering employment, social security and hospital record histories, we investigate the effect of acute cardiovascular health shocks resulting in unplanned hospitalisation, on blue collars’ long-term labour outcomes in Italy. The Italian institutional setting, characterised by a highly regulated labour market and high job protection, is different from that of countries - mainly Nordic and Anglo-Saxon -covered in previous studies. We apply matching and parametric regression techniques to remove possible bias arising from observable and time-invariant unobservable confounders. Results point at sizeable and persistent reductions in employment and labour income, while hours and wage adjustments appear limited. Whereas a relatively generous social insurance system might compensate the earnings loss, our findings question the appropriateness of existing labour inclusion policies.
    Date: 2019–11
  8. By: Khaled Masoumifard; Mohammad Zokaei
    Abstract: The present paper addresses the issue of choosing an optimal dynamic reinsurance policy, which is state-dependent, for an insurance company that operates under multiple insurance business lines. The optimal survival function is characterized as the unique nondecreasing viscosity solution of the associated Hamilton-Jacobi-Bellman equation (HJB) equation with limit one at infinity. The finite difference method (FDM) has been utilized for the numerical solution of the optimal survival function and optimal dynamic reinsurance strategies and the proof for the convergence of the numerical solution to the survival probability function is provided.
    Date: 2020–01
  9. By: Kelly, Morgan (University College Dublin); Gráda, Cormac Ó (University College); Solar, Peter (VUB, Brussels)
    Abstract: Shipping was central to the rise of the Atlantic economies, but an extremely hazardous activity: in the 1780s, roughly five per cent of British ships sailing in summer for the United States never returned. Against the widespread belief that shipping technology was stagnant before iron steamships, in this paper we demonstrate that between the 1780s and 1820s, a safety revolution occurred that saw shipping losses and insurance rates on oceanic routes almost halved thanks to steady improvements in shipbuilding and navigation. Iron reinforcing led to stronger vessels while navigation improved, not through chronometers which remained too expensive and unreliable for general use, but through radically improved charts, accessible manuals of basic navigational techniques, and improved shore-based navigational aids.
    Keywords: shipping, insurance, Industrial Revolution JEL Classification: N, N73, G22
    Date: 2019
  10. By: Safoora Zarei; Ali R. Fallahi
    Abstract: Every time drivers take to the road, and with each mile that they drive, exposes themselves and others to the risk of an accident. Insurance premiums are only weakly linked to mileage, however, and have lump-sum characteristics largely. The result is too much driving, and too many accidents. In this paper, we introduce some useful theoretical results for Pay-As-You-Drive in Automobile insurances. We consider a counting process and also find the distribution of discounted collective risk model when the counting process is non-homogeneous Poisson.
    Date: 2019–12
  11. By: Yoichi Arai (Institute for Fiscal Studies); Yu-Chin Hsu (Institute for Fiscal Studies); Toru Kitagawa (Institute for Fiscal Studies and cemmap and University College London); Ismael Mourifié (Institute for Fiscal Studies); Yuanyuan Wan (Institute for Fiscal Studies)
    Abstract: We propose a new specification test for assessing the validity of fuzzy regression discontinuity designs (FRD-validity). We derive a new set of testable implications, characterized by a set of inequality restrictions on the joint distribution of observed outcomes and treatment status at the cut-off. We show that this new characterization exploits all the information in the data useful for detecting violations of FRD-validity. Our approach differs from, and complements existing approaches that test continuity of the distributions of running variables and baseline covariates at the cut-off since ours focuses on the distribution of the observed outcome and treatment status. We show that the proposed test has appealing statistical properties. It controls size in large sample uniformly over a large class of distributions, is consistent against all fixed alternatives, and has non-trivial power against some local alternatives. We apply our test to evaluate the validity of two FRD designs. The test does not reject the FRD-validity in the class size design studied by Angrist and Lavy (1999) and rejects in the insurance subsidy design for poor households in Colombia studied by Miller, Pinto, and Vera-Hernández (2013) for some outcome variables, while existing density tests suggest the opposite in each of the cases.
    Keywords: Fuzzy regression discontinuity design, nonparametric test, inequality restriction, multiplier bootstrap
    Date: 2019–03–20
  12. By: Annathurai, Anusha
    Abstract: Analysis on corporate governance principles of AIA Bhd. is studied in this article along with their risk exposure and performance as per the concern of the research objective. The performance of the company is indicated by Return on Asset which act as the dependent variable of this study. Whereas, the risk exposure is indicated by internal and external factors of independent variables. Internal factors cover Liquidity Risk in terms of current ratio and quick ratio; Credit Risk in terms of average collection period and debt to income ratio; and Operational Risk in terms of operational ratio and operating margin. Meanwhile, external factor covers Market Risk in terms of Gross Domestic Product (GDP) rate, Inflation Rate, Interest Rate and Exchange Rate. The analysis of this study shows that the influence of these independent variables is significant towards the dependent variable. The analysis concluded that the most significant variable is Operating Margin.
    Keywords: AIA Bhd., Corporate Governance, Performance, Risk, Insurance, Return on Asset, Liquidity Risk, Credit Risk, Operational Risk, Market Risk, Current Ratio, Quick Ratio, Average Collection Period, Debt to Income Ratio, Operational Risk, Operating Margin, Gross Domestic Product (GDP), Inflation Rate, Interest Rate, Exchange Rate AIA Bhd., Corporate Governance, Performance, Risk, Insurance, Return on Asset, Liquidity Risk, Credit Risk, Operational Risk, Market Risk, Current Ratio, Quick Ratio, Average Collection Period, Debt to Income Ratio, Operational Risk, Operating Margin, Gross Domestic Product (GDP), Inflation Rate, Interest Rate, Exchange Rate
    JEL: G3 G32 O16
    Date: 2019–11–21
  13. By: Bart Cockx (Department of Economics, Ghent University); Koen Declercq (Leuven Economics of Education Research, KU Leuven; IRES/LIDAM, UCLouvain and FNRS); Muriel Dejemeppe (IRES/LIDAM, UCLouvain); Leda Inga (Centre for Research in Economics and Management, University of Luxembourg); Bruno Van der Linden (IRES/LIDAM, UCLouvain and FNRS)
    Abstract: We examine the impact of scrapping entitlement to unemployment insurance (UI) on job finding and employment of young labor market entrants. In Belgium, young labor market entrants with short or no employment record are eligible for non-means-tested UI after a one-year waiting period. This zero benefit period gives rise to an unusual inclining benefit profile. We exploit a policy change that restricted access to UI for two groups of job seekers in 2015: university graduates aged 25 and older at the end of their waiting period and high school dropouts younger than 21. At the moment when the reform was announced, many job seekers realized that they were not eligible anymore for UI by the end of their waiting period. We use a differences-in-differences approach to identify the causal impact of the reform. Our main finding is that losing eligibility to UI does not increase the employment probability of targeted youths.
    Keywords: Youth unemployment, Unemployment insurance, Policy evaluation, Difference-indifferences
    JEL: J64 J65 J68
    Date: 2019–12

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