nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒01‒27
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Medicaid Expansion and the Unemployed By Buchmueller, Thomas C.; Levy, Helen; Valletta, Robert G.
  2. Long term care insurance with state-dependent preferences By DE DONDER Philippe,; LEROUX Marie-Louise,
  3. Expanding Health Insurance for the Elderly of the Philippines By Abrigo, Michael R.M.; Halliday, Timothy J.; Molina, Teresa
  4. Disaster Insurance in Developing Asia: An Analysis of Market-Based Schemes By Surminski, Swenja; Panda, Architesh; Lambert, Peter John
  5. 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
  6. Enhancing ICT for Insurance in Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  7. Dependence Structure of Insurance Credit Default Swaps By Mudiangombe, Benjamin; Muteba Mwamba, John Weirstrass
  8. The Valuation of Insurance Liabilities: A Framework Based on First Principles By Andrea Bergesio; Paul Huber; Pablo Koch-Medina; Lutz Wilhelmy
  9. Weather-index drought insurance in Burkina-Faso: assessment of its potential interest to farmers By Dissemin, uploaded via; Berg, Alexis; Quirion, Philippe; Sultan, Benjamin
  10. Welfare Effects of Fiscal Procyclicality: Public Insurance with Heterogeneous Agents By Alvaro Aguirre
  11. Uninsurance and Purchases of Prescription Drugs with High Rates of Misuse: Evidence from the Federal Dependent Coverage Mandate By DiNardi, Michael

  1. By: Buchmueller, Thomas C. (University of Michigan); Levy, Helen (University of Michigan); Valletta, Robert G. (Federal Reserve Bank of San Francisco)
    Abstract: We examine how a key provision of the Affordable Care Act – the expansion of Medicaid eligibility – affected health insurance coverage, access to care, and labor market transitions of unemployed workers. Comparing trends in states that implemented the Medicaid expansion to those that did not, we find that the ACA Medicaid expansion substantially increased insurance coverage and improved access to health care among unemployed workers. We then test whether this strengthening of the safety net affected transitions from unemployment to employment or out of the labor force. We find no meaningful statistical evidence in support of moral hazard effects that reduce job finding or labor force attachment.
    Keywords: medicaid, insurance coverage, access to care, unemployment, labor force transitions
    JEL: J64 J68 I13 I18
    Date: 2019–12
  2. By: DE DONDER Philippe, (Toulouse School of Economics); LEROUX Marie-Louise, (Université du Québec à Montréal)
    Abstract: We study the demand for actuarially fair Long Term Care (LTC hereafter) insurance in a setting where autonomous agents only care for daily life consumption while dependent agents also care for LTC expenditures. We assume that dependency decreases the marginal utility of daily life consumption. We fi rst obtain that some agents optimally choose not to insure themselves, while no agent wishes to buy complete insurance. We then show that the comparison of marginal utility of income (as opposed to consumption) across health states depends on (i) whether agents do buy LTC insurance at equilibrium or not, (ii) the comparison of the degree of risk aversion for consumption and for LTC expenditures, and (iii) the income level of agents. Our results then off er testable implications that can explain (i) why few people buy Long Term Care insurance and (ii) the discrepancies between various empirical works when measuring the extent of state-dependent preferences for LTC.
    Keywords: long term care insurance puzzle, actuarially fair insurance, risk aversion
    JEL: D11 I13
    Date: 2019–12–17
  3. By: Abrigo, Michael R.M. (Philippine Institute for Development Studies); Halliday, Timothy J. (University of Hawaii at Manoa); Molina, Teresa (University of Hawaii at Manoa)
    Abstract: This paper evaluates a Filipino policy that expanded health insurance coverage of its senior citizens, aged 60 and older, in 2014. Using regression discontinuity and difference-in-differences methods, we find that the expansion increases insurance coverage by approximately 16 percentage points. We show that the compliers, those induced by the policy to obtain insurance, are disproportionately female and largely from the middle of the socioeconomic distribution. Instrumental variables estimates indicate that out-of-pocket medical expenditures more than double among the compliers. We argue that this is most likely driven by an outward shift in the medical demand curve.
    Keywords: insurance, medical demand, compliers, Philippines
    JEL: I10 I13 I14
    Date: 2019–12
  4. By: Surminski, Swenja (London School of Economics and Political Science); Panda, Architesh (London School of Economics and Political Science); Lambert, Peter John (London School of Economics and Political Science)
    Abstract: In recent years, insurance against natural disasters has gained recognition as an important tool for climate risk management that could, if carefully implemented, help increase the resilience of those insured. In response, insurance solutions are increasingly tested and applied in many countries that have no prior experience with insurance or no existing market. This paper analyzes the status, types, and patterns of market-based disaster insurance schemes across emerging and developing countries in Asia. We provide a snapshot of the current use of insurance based on data from Grantham Research Institute on Climate Change and the Environment’s Disaster Risk Transfer Scheme Database (2012–2018). Our analysis shows that although the use of insurance is expanding, there are many countries that still don’t have any kind of cover available. Where insurance mechanisms exist, they often rely on subsidies or bundling strategies. Although a mix of insurance schemes covering risks for governments (sovereign); or at meso (risk aggregators, cooperatives); and micro level currently operate to address a wide variety of climate and disaster risks, without demand-side support, many markets are likely to collapse or, at the very least, experience far lower penetration rates. We conclude with a discussion of the role of these insurance schemes in increasing resilience, which raises important questions for designing new and measuring and evaluating existing insurance schemes.
    Keywords: Asia; climate change; disaster insurance; resilience
    JEL: G22 G32 Q54
    Date: 2019–09–26
  5. 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: 2018–09–19
  6. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study assesses how enhancing information and communication technology (ICT) affects life insurance and non-life insurance in a panel of forty-eight African countries with data for the period 2004-2014. The adopted ICT dynamics are: mobile phone penetration, internet penetration and fixed broadband subscriptions. The empirical evidence is based on Generalized Method of Moments. The results show that enhancing mobile phone penetration and fixed broadband subscriptions has a positive net effect on life insurance consumption while enhancing fixed broadband subscriptions also has a positive net impact of on non-life insurance penetration.
    Keywords: Insurance; Information technology
    JEL: I28 I30 L96 O16 O55
    Date: 2019–01
  7. By: Mudiangombe, Benjamin; Muteba Mwamba, John Weirstrass
    Abstract: We examine the dependence structure of insurance credit default swap (CDS) indices in the pairs of markets of the United Kingdom (UK), Eurozone (EU) and United States (US) insurance industries during the period of January 2004 to October 2018. We applied the Archimedean Clayton copula to model the lower tail and the Gumbel copula to model the upper tail of the empirical distributions. The empirical results show a significant dependence structure for both constant and time-varying copulas, implying the co-movement in the pairs of markets during the study period, influencing the contagion risk and showing strong dependence among Markets. The highest tail dependence and positive adjustment parameters seen in crisis and debt-crisis in the lower regime explains the link between these markets. The crucial findings show confirmation of asymmetric tail dependence proposing the propagation of risks of default among UK, EU and US markets. The conditional tail of the time-varying dependence structure explains the behaviour of dependence better than the constant level. This finding is robust when measuring the evolution of the dependence structure over time. The results are consistent for risk managers and investors to select the portfolio investment in different markets during stress period.
    Keywords: Dependence structure, Insurance credit default swaps, Constant and Time-varying Copulas
    JEL: C0 C01 C02 C63 G11 G15
    Date: 2019–09–05
  8. By: Andrea Bergesio (Department of Banking and Finance; Swiss Finance Institute); Paul Huber (Swiss Re); Pablo Koch-Medina (University of Zurich - Department of Banking and Finance; Swiss Finance Institute); Lutz Wilhelmy (Swiss Re)
    Abstract: We describe a framework for the valuation of insurance liabilities that relies on first principles in finance theory. Key features of the economic value of liabilities are its market-consistency and the inclusion of the costs of financial frictions. We compare this framework to the Solvency II approach and highlight the differences.
    Keywords: Insurance, Valuation, Financial Frictions, Market Consistency, Solvency II
    JEL: G22 G32
    Date: 2020–01
  9. By: Dissemin, uploaded via; Berg, Alexis; Quirion, Philippe; Sultan, Benjamin
    Abstract: By using a detailed agricultural and climate dataset over Burkina-Faso and simple assumptions regarding the form of an insurance contract, the authors investigate the potential economic efficiency for farmers of a weather-index insurance system in this country. To do so, the results of more than 3000 simulated contracts applied to 30 districts, 21 yr (1984–2004), and five crops (cotton, millet, sorghum, maize, and groundnut) are explored. It is found that such an insurance system, even based on a simple weather index like cumulative rainfall during the rainy season, can present a significant economic efficiency for some crops and districts. The determinants of the efficiency of such contracts are analyzed in terms of yield/index correlations and yield variability. As a consequence of these two main determinants, the farmer's gain from an insurance contract is higher in the driest part of the country. In the same way, maize and groundnuts are the most suitable to implement an insurance system since their respective yields show a large variance and a generally high correlation with the weather index. However, the implementation of a real weather-index insurance system in West Africa raises a number of key practical issues related to cultural, economic, and institutional aspects.
    Date: 2018–03–15
  10. By: Alvaro Aguirre
    Abstract: This paper pursues a welfare analysis of fiscal policy, specifically public spending, in an economy with heterogenous agents and incomplete markets. The main quantitative exercise consists in measuring the gains of switching from the (procyclical) spending path of the typical developing country to an acyclical or countercyclical path. The model emphasizes the role of transfer payments from the government to households in alleviating the costs of idiosyncratic shocks. Since these correlate with aggregate shocks, the way fiscal policy is conducted along the business cycle has important welfare effects. I find that the costs of procyclicality are relatively large and very heterogeneous. While wealth-rich agents don't suffer from procyclicality, poor agents, being either unemployed or unskilled, lose the most. In terms of life-time consumption equivalents these agents may lose as much as 2% from fiscal procyclicality, considering only the fraction of spending that is allocated as transfer payments.
    Date: 2020–01
  11. By: DiNardi, Michael
    Abstract: Prescription central nervous system depressants, opioid pain relievers, and stimulants provide therapeutic value, but misuse for their recreational value is a growing problem in the United States. Because health insurance lowers the cost of purchasing prescription drugs, losing coverage may cause individuals to forgo treatment and decrease prescription drug consumption which could reduce health and increase the likelihood of overdose and death if individuals substitute to using illicit drugs. Using a regression discontinuity design, I estimate the effect of aging out of the federal dependent coverage mandate at age 26 on legal purchases of prescription central nervous system depressants, opioids, and stimulants. Individuals are 0.8-1 percentage points less likely to purchase a prescription central nervous system depressant and 1-2.6 percentage point less likely to purchase a prescription opioid after turning 26. These effects are strongest for women, while estimated effects for men are generally negative but imprecise.
    Keywords: health insurance, prescription drugs, substance abuse
    JEL: I13 I19
    Date: 2019–12–21

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