nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒04‒06
twelve papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Long Term Care Insurance with State-Dependent Preferences By Philippe De Donder; Marie-Louise Leroux
  2. Long-Term Health Insurance: Theory Meets Evidence By Juan Pablo Atal; Hanming Fang; Martin Karlsson; Nicolas R. Ziebarth
  3. Blessing or curse? Government funding of deposit insurance and corporate lending By Delis, Manthos; Iosifidi, Maria; Papadopoulos, Panagiotis
  4. Profile of SSI and DI Beneficiaries with Work Goals and Expectations in 2015 By Gina Livermore; Marisa Shenk; Purvi Sevak
  5. How Financialization Reshapes Public Health Care Systems - The Case of Assurance Maladie By Ana Carolina Cordilha
  6. Fiscal Federalism and the Budget Impacts of the Affordable Care Act's Medicaid Expansion By Jonathan Gruber; Benjamin D. Sommers
  7. An experimental study of charity hazard : The effect of risky and ambiguous government compensation on flood insurance demand By Peter John Robinson; W.J.W. Botzen; F. Zhou
  8. Estimating the extra costs of disability in European countries: Implications for poverty measurement and disability-related decommodification By Morris, Zachary A.; Zaidi, Asghar
  9. Répondre aux défis du marché du travail en Belgique By Müge Adalet McGowan; Alexander Hijzen; David Law; Andrea Salvatori; Patrizio Sicari; Stefan Thewissen
  10. Addressing labour market challenges in Belgium By Müge Adalet McGowan; Alexander Hijzen; David Law; Andrea Salvatori; Patrizio Sicari; Stefan Thewissen
  11. Labor force participation, job search effort and unemployment insurance in the laboratory By Lechthaler, Wolfgang; Ring, Patrick
  12. Optimally Solving Banks' Legacy Problems By Anatoli Segura; Javier Suarez

  1. By: Philippe De Donder; Marie-Louise Leroux
    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 first 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 offer 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: 2020
  2. By: Juan Pablo Atal (University of Pennsylvania); Hanming Fang (University of Pennsylvania); Martin Karlsson (CINCH, University of Duisburg-Essen); Nicolas R. Ziebarth (Cornell University)
    Abstract: To insure policyholders against contemporaneous health expenditure shocks and future reclassification risk, long-term health insurance constitutes an alternative to community-rated short-term contracts with an individual mandate. Relying on unique claims panel data from a large private insurer in Germany, we study a real-world long-term health insurance application with a life-cycle perspective. We show that German long-term health insurance (GLTHI) achieves substantial welfare gains compared to a series of risk-rated short-term contracts. Although, by its simple design, the premium setting of GLTHI contract departs significantly from the optimal dynamic contract, surprisingly we only find modest welfare differences between the two. Finally, we conduct counterfactual policy experiments to illustrate the welfare consequences of integrating GLTHI into a system with a “Medicare-like†public insurance that covers people above 65.
    Keywords: Long-Term Health Insurance, Individual Private Health Insurance, Health Care Reform
    JEL: G22 I11 I18
    Date: 2020–01
  3. By: Delis, Manthos; Iosifidi, Maria; Papadopoulos, Panagiotis
    Abstract: A key policy to limit the possibility of bank runs is an explicit deposit insurance scheme, which can be either privately or government funded. Using syndicated loans from 63 countries during the period 1985–2016, we study the effect of government involvement in deposit insurance funding on price and non-price characteristics of loans. We show that changes from purely private-funded to either government-funded or jointly funded deposit insurance increase all-in-spread-drawn by approximately 4.6%, further increase loan fees, decrease loan maturity, and increase the use of performance pricing provisions. Our findings are consistent with the moral hazard problem behind government-funded deposit insurance schemes.
    Keywords: Deposit insurance; Government or private funding; Lending terms; Syndicated loans
    JEL: G21 G28
    Date: 2020–03–18
  4. By: Gina Livermore; Marisa Shenk; Purvi Sevak
    Abstract: This brief presents an updated profile of work-oriented beneficiaries and compares them to other SSI and DI beneficiaries who are not interested in work.
    Keywords: Social Security Disability Insurance, Supplemental Security Income, disability, employment, National Beneficiary Survey
  5. By: Ana Carolina Cordilha (Centre d'Economie de l'Université de Paris Nord (CEPN))
    Abstract: This article seeks to show how financialization is reshaping Public Health Care Systems (PHCS). To do so, we combine a theoretical discussion and an empirical investigation to examine the increasing participation of financial actors and instruments in these systems over the last decades. In the first part, we present the conventional approach for assessing PHCS transformation to date and argue for the need to incorporate the concept of 'financialization'. In the second part, we suggest a method for empirically examining how financialization alters the internal structures and organization of PHCS. In the last part, we apply this method to conduct an in-depth analysis of the French public health system, Assurance Maladie (AM). Our findings provide robust evidence that financialization had a major influence in the direction taken by the post-1990s reforms in this case, with new strategies allowing the increased participation of financial capital in the system's long-term, short-term, and investment financing. In the conclusion, we provide a critical assessment of financialized strategies, highlighting their adverse impacts on core principles of PHCS such as solidarity, stability, and democratic participation.
    Keywords: Health, Health Care Financing, Public Health, National Government Health Expenditure, Social Security, Deficit, Debt, General Financial Markets
    JEL: I10 I13 I18 H51 H55 H62 H63 G1
    Date: 2020–03
  6. By: Jonathan Gruber; Benjamin D. Sommers
    Abstract: Medicaid’s federal-state matching system of financing is the nation’s largest example of fiscal federalism. Using generous federal subsidies, the Affordable Care Act incentivized states to expand Medicaid, which became a state option in the aftermath of a 2012 Supreme Court ruling. As of early 2020, 14 states had not yet expanded, with concerns over state budgetary effects described as a key barrier. We use an event-study approach to analyze state budget data from 2010-2018 and assess the effects of state Medicaid expansion decisions. We find that Medicaid expansion increased total spending in expansion states by 6% to 9%, compared to non-expansion states. By source of funds, federal spending via the states increased by 10% in the first year of Medicaid expansion, rising to 27% in 2018. Changes in spending from state funding were modest and non-significant, with less than a 1% change from baseline annually in the most recent years, 2017 and 2018. Meanwhile, we find no evidence that increased Medicaid spending from expansion produced any reductions in spending on education, corrections, transportation, or public assistance. Changes in Medicaid spending tracked closely with the baseline pre-ACA (2013) uninsured rate in each states, with expansion leading to roughly $2680 in added annual spending per uninsured adult. As a result, we estimate states that didn’t expand Medicaid passed up $43 billion in federally-subsidized program funds in 2018. Finally, state projections in the aggregate were reasonably accurate, with expansion states projecting average Medicaid spending from 2014-2018 within 2 percent of the actual amounts, and in fact overestimating Medicaid spending in most years.
    JEL: H77 I18
    Date: 2020–03
  7. By: Peter John Robinson; W.J.W. Botzen; F. Zhou
    Abstract: This paper examines the problem of “charity hazard†, which is the crowding out of private insurance demand by government compensation. In the context of flood insurance and disaster financing, charity hazard is particularly worrisome given current trends of increasing flood risks as a result of climate change and more people choosing to locate in high-risk areas. We conduct an experimental analysis of the influence on flood insurance demand of risk and ambiguity preferences and the availability of different forms of government compensation for disaster damage. Certain and risky government compensation crowd out demand, confirming charity hazard, but this is not observed for ambiguous compensation. Ambiguity averse subjects have higher insurance demand when government compensation is ambiguous relative to risky. Policy recommendations are discussed to overcome charity hazard
    Keywords: Ambiguity preferences, charity hazard;, economic experiment;, flood insurance demand, risk preferences
    Date: 2019–10
  8. By: Morris, Zachary A.; Zaidi, Asghar
    Abstract: It is widely accepted that people with disabilities incur additional expenditures on transport, heating, equipment and other items. In this article, we estimate the magnitude of these extra costs of living for adults with disabilities aged 50–65 across 15 countries of Europe using the Survey of Health, Aging, and Retirement in Europe (SHARE) data. Drawing on the standard of living approach of Zaidi and Burchardt, we compare the incomes required by households with and without adults with disabilities to obtain an equivalent standard of living. We advance upon this research by drawing on the cross-nationally harmonized data of adults aged 50+ from the SHARE. The results suggest that there are substantial extra costs of disability in these countries: around 44 percent of income for a household with an adult reporting a work-related disability and somewhat less than 30 percent of income for a household with an adult who receives disability benefits. Applying an equivalization scale based on these figures increases the overall poverty incidence rate, especially for households with disabled adult members. These findings thus have implications for analysing the entitlement and benefit levels for disability support programmes and for devising accurate poverty estimates concerning persons with disabilities.
    Keywords: costs of disability; disability insurance; poverty measurement; standard of living; work-disability
    JEL: N0
    Date: 2020–01–20
  9. By: Müge Adalet McGowan; Alexander Hijzen; David Law; Andrea Salvatori; Patrizio Sicari; Stefan Thewissen
    Abstract: La création d’emplois a contribué à faire reculer le chômage, mais le marché du travail belge demeure confronté à de nombreux défis. Les taux d’emploi restent bas en raison d’obstacles tels que le faible niveau des compétences et le manque d’incitations au travail. En outre, les mutations du travail vont obliger les travailleurs à s’adapter plus vite. Ce chapitre présente une analyse détaillée des actions à mener en priorité pour relever ces défis, en s’appuyant notamment sur les constatations de la Stratégie de l’OCDE pour l’emploi. L’une des priorités sera de faire en sorte que chaque travailleur ait accès à la formation tout au long de la vie, en prévoyant des allocations complémentaires pour les travailleurs en situation de désavantage. Pour améliorer les transitions vers l’emploi, il convient de généraliser l’utilisation des outils de profilage des risques individuels. Une réforme des allocations de chômage et des prestations liées à l’exercice d’un emploi permettrait de combiner plus harmonieusement aide au revenu et incitations au travail. La réforme de certains aspects de la législation en matière de protection de l’emploi, tels que ceux liés aux licenciements collectifs, et du système de formation des salaires amènerait davantage de flexibilité. Bien que la Belgique ait accompli des progrès notables sur le plan de la fiscalité et des besoins d’aide sociale associés à l’emploi atypique, quelques écarts persistent vis-à-vis des travailleurs réguliers.Ce Document de travail a trait à l’Étude économique de l’OCDE de la Belgique, 2020 ( e-en-un-coup-d-oeil/)
    Keywords: assurance chômage, compétences, emploi, incitations au travail, politiques du marché du travail
    JEL: J20 J30 J50 J60
    Date: 2020–03–20
  10. By: Müge Adalet McGowan; Alexander Hijzen; David Law; Andrea Salvatori; Patrizio Sicari; Stefan Thewissen
    Abstract: Job creation has lowered unemployment, but the Belgian labour market still faces many challenges. Employment rates remain low, reflecting barriers to finding a job such as low levels of skills and weak work incentives. In addition, the changing nature of work will require faster adaptation of workers. In order to address these challenges, this chapter presents a detailed analysis of policy priorities, drawing notably on insights from the OECD Jobs Strategy. One priority should be that each worker has access to lifelong training, with additional allowances targeted to disadvantaged workers. To improve transitions into work, the use of tools for the profiling of individualised risks should be extended. A better combination of income support and incentives could be achieved through reforming both unemployment and in-work benefits. Reforming some aspects of employment protection legislation, such as those related to collective dismissals, and the wage formation system, would boost flexibility.This Working Paper relates to the 2020 OECD Economic Survey of Belgium omic-snapshot/.
    Keywords: employment, labour market policy, skills, unemployment insurance, work incentives
    JEL: J20 J30 J50 J60
    Date: 2020–03–20
  11. By: Lechthaler, Wolfgang; Ring, Patrick
    Abstract: How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.
    Keywords: Job Search,Employment,Labor Force Participation,Unemployment Insurance,Economic Recession,Laboratory,Experiment
    JEL: J21 J65
    Date: 2020
  12. By: Anatoli Segura (Bank of Italy); Javier Suarez (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We characterize policy interventions directed to minimize the cost to the deposit guarantee scheme and the taxpayers of banks with legacy problems. Non-performing loans (NPLs) with low and risky returns create a debt overhang that induces bank owners to forego profitable lending opportunities. NPL disposal requirements can restore the incentives to undertake new lending but, as they force bank owners to absorb losses, can also make them prefer the bank being resolved. For severe legacy problems, combining NPL disposal requirements with positive transfers is optimal and involves no conflict between minimizing the cost to the authority and maximizing overall surplus.
    Keywords: Non performing loans, deposit insurance, debt overhang, optimal intervention, state aid.
    JEL: G01 G20 G28
    Date: 2019–04

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