nep-ias New Economics Papers
on Insurance Economics
Issue of 2022‒01‒10
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Demand for Multi-Year Catastrophe Insurance Contracts: Experimental Evidence for Mitigating the Insurance Gap By Thomas Dudek; Eric R. Ulm; Ilan Noy
  2. Data and Methods for Constructing Synthetic Firms in CBO’s Health Insurance Simulation Model, HISIM2: Working Paper 2021-15 By Lucas Goodman; Ben Hopkins; Alex Minicozzi; Eamon Molloy
  3. Effect of Health Insurance in India: A Randomized Controlled Trial By Anup Malani; Phoebe Holtzman; Kosuke Imai; Cynthia Kinnan; Morgen Miller; Shailender Swaminathan; Alessandra Voena; Bartosz Woda; Gabriella Conti
  4. Work-Related Overpayments Among Disability Beneficiaries By Marisa Shenk; Gina Livermore
  5. Work-Related Benefit Suspension Experiences Among Disability Beneficiaries By Marisa Shenk; Purvi Sevak
  6. Life insurance convexity By Kubitza, Christian; Grochola, Nicolaus; Gründl, Helmut
  7. Investor-driven corporate finance: Evidence from insurance markets By Kubitza, Christian
  8. The Right to Health and the Health Effects of Denials By Bhalotra, Sonia; Fernandez, Manuel
  9. Gender Differences in Medical Evaluations: Evidence from Randomly Assigned Doctors By Marika Cabral; Marcus Dillender
  10. Testing for Ethnic Discrimination in Outpatient Health Care: Evidence from a Field Experiment in Germany By Martin Halla; Christopher Kah; Rupert Sausgruber
  11. Productivity shocks, long-term contracts and earnings dynamics By Balke, Neele; Lamadon, Thibaut
  12. Barriers to Trade in Financial and Insurance Services: Evidence from the United Kingdom By Jiri Podpiera
  13. When (and Why) Providers Do Not Respond to Changes in Reimbursement Rates By Marcus Dillender; Lu G. Jinks; Anthony T. Lo Sasso
  14. Responsible investment and stock market shocks: Short-term insurance and persistent outperformance post-crisis? By Eisenkopf, Jana; Juranek, Steffen; Walz, Uwe
  15. Déterminants de l'accès aux soins et des dépenses de santé en Tunisie By Ismaïl, Safa
  16. Choice Determinants of a Smart Contract vs. Ambiguous Expert-Based Insurance: An Experiment By Giuseppe Attanasi; Marta Ballatore; Michela Chessa; Agnès Festré; Chris Ouangraoua

  1. By: Thomas Dudek; Eric R. Ulm; Ilan Noy
    Abstract: People often fail to insure against catastrophes, even when insurance is subsidized. Even when insuring homes, many homeowners still underinsure the full value of their assets. Some researchers have suggested using long-term insurance contracts to reduce these insurance gaps. We examine insurance decisions in a computer-administered experiment that makes several contributions to our understanding of insurance decisions. First, we provide additional evidence showing that many people prefer long-term insurance. Offering this type of insurance may thus increase insurance penetration. Second, we find that underinsurance can result from the reluctance to update the sum insured if there are costs involved with this updating. Long-term insurance contracts that automatically consider price changes over time can thus also deliver a reduction in the insurance gap. Third, we find that once people have made a decision, they tend to repeat it, demonstrating a strong preference for the status quo. Our research suggests that using this status quo bias may allow insurance companies to further increase insurance demand. As previously demonstrated, our results confirm that subsidies are ineffective in increasing insurance penetration.
    Keywords: individual decision-making, choice under risk, disaster insurance, underinsurance, status quo, subsidies
    JEL: C91 D81 G22
    Date: 2021
  2. By: Lucas Goodman; Ben Hopkins; Alex Minicozzi; Eamon Molloy
    Abstract: This paper discusses how the Congressional Budget Office constructs “synthetic firms†—businesses composed of artificial groups of workers—used in the agency’s health insurance simulation model, or HISIM2, which underlies projections of insurance coverage. Detailed information on a worker’s firm and coworkers is important for modelling whether that worker is offered employment-based insurance, because a worker’s access to such insurance depends on the collective effect of how much employees at the firm demand insurance and how much they will cost to insure. Unfortunately, no
    JEL: H51 I13
    Date: 2021–12–13
  3. By: Anup Malani (University of Chicago); Phoebe Holtzman; Kosuke Imai (Harvard University); Cynthia Kinnan (Tufts University); Morgen Miller (University of Chicago); Shailender Swaminathan (Sai University); Alessandra Voena (The University of Chicago); Bartosz Woda (University of Chicago); Gabriella Conti (University College London)
    Abstract: We report on a large randomized controlled trial of hospital insurance for above-poverty-line Indian households. Households were assigned to free insurance, sale of insurance, sale plus cash transfer, or control. To estimate spillovers, the fraction of households offered insurance varied across villages. The opportunity to purchase insurance led to 59.91% uptake and access to free insurance to 78.71% uptake. Access increased insurance utilization. Positive spillover effects on utilization suggest learning from peers. Many beneficiaries were unable to use insurance, demonstrating hurdles to expanding access via insurance. Across a range of health measures, we estimate no significant impacts on health.
    Keywords: randomized control trials, hospital insurance, India, peer effects, Spillover effects
    JEL: I13 C93 I14
    Date: 2021–12
  4. By: Marisa Shenk; Gina Livermore
    Abstract: This disability policy brief examines the work-related overpayment experiences of recently employed Social Security Disability Insurance and Supplemental Security Income beneficiaries using data from the 2017 National Beneficiary Survey.
    Keywords: Disability Insurance, Supplemental Security Income, employment
  5. By: Marisa Shenk; Purvi Sevak
    Abstract: This disability policy brief examines the work-related benefit suspension experiences of recently employed Social Security Disability Insurance and Supplemental Security Income beneficiaries using data from the 2017 National Beneficiary Survey.
    Keywords: Disability Insurance (DI), Supplemental Security Income (SSI), employment
  6. By: Kubitza, Christian; Grochola, Nicolaus; Gründl, Helmut
    Abstract: Life insurers massively sell savings contracts with surrender options which allow policyholders to withdraw a guaranteed amount before maturity. These options move toward the money when interest rates rise. Using data on German life insurers, we estimate that a 1 percentage point increase in interest rates raises surrender rates by 17 basis points. We quantify the resulting liquidity risk in a calibrated model of surrender decisions and insurance cash flows. Simulations predict that surrender options can force insurers to sell up to 3% of their assets, depressing asset prices by 90 basis points. The effect is amplified by the duration of insurers' investments, and its impact on the term structure of interest rates depends on life insurers' investment strategy.
    Keywords: Life Insurance,Liquidity Risk,Interest Rates,Fire Sales,Systemic Risk
    JEL: G22 E52 G32 G28
    Date: 2021
  7. By: Kubitza, Christian
    Abstract: This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small subset of firms for identification, I show that these increases in bond demand raise bond prices and lower firms' funding costs. In response, firms issue more bonds, especially when their bond underwriters are well connected with investors. Firms use the proceeds to raise investment rather than equity payouts. The results emphasize the significant impact of investor demand on firms' financing and investment activities.
    Keywords: Corporate Finance,Corporate Bonds,Insurance,Real Effects
    Date: 2021
  8. By: Bhalotra, Sonia (University of Warwick, CEPR, IZA, IEA, CAGE); Fernandez, Manuel (Universidad de los Andes and IZA)
    Abstract: We investigate supply-side barriers to medical care in Colombia, where citizens have a constitutional right to health, but insurance companies impose restrictions. We use administrative data on judicial claims for health as a proxy for unmet demand. We validate this using the health services utilization register, showing that judicial claims map into large, pervasive decreases in medical consultations, procedures, hospitalizations and emergency care. This manifests in population health outcomes. We identify increases in mortality pervasive across cause, age and sex, with larger increases for cancer, individuals over the age of fifty, women and the poor.
    Keywords: Health care, health insurance, mortality, right-to-health, litigation, universalhealth-coverage, Colombia JEL Classification: G22, I11, I13, I18, K38, K42
    Date: 2021
  9. By: Marika Cabral; Marcus Dillender
    Abstract: While a growing body of evidence documents large gender disparities in health care and related social insurance programs, little is known about what drives these disparities. We leverage administrative data and random assignment of doctors to patients inherent within the workers’ compensation insurance claim dispute resolution process to study the impact of gender match between doctors and patients on medical evaluations and subsequent social insurance benefits received. Compared to differences among their male patient counterparts, female patients randomly assigned a female doctor rather than a male doctor are 5.0% more likely to be evaluated as disabled and receive 8.5% more subsequent cash benefits on average. There is no analogous gender-match effect for male patients. The magnitude of these effects implies that having female doctors evaluate patients entirely offsets the observed gender gap in the likelihood of being evaluated as disabled when male doctors evaluate patients. We explore mechanisms through further analysis of the administrative data and complementary survey evidence. In addition, we present broader evidence on gender gaps in workers' compensation insurance and gender homophily in patients' selections of doctors in settings where patients have choice. Combining this evidence, we conduct policy counterfactuals illustrating how policies increasing gender diversity among doctors or increasing gender homophily in patient-doctor matches may impact gender gaps in evaluated disability. Our findings indicate that policies increasing the share of female patients evaluated by female doctors may substantially shrink gender gaps in medical evaluations and associated outcomes.
    JEL: I11 I14 J16
    Date: 2021–12
  10. By: Martin Halla; Christopher Kah (Department of Economic Theory, Policy and History, University of Innsbruck); Rupert Sausgruber
    Abstract: To test for ethnic discrimination in access to outpatient health care services, we carry out an email-correspondence study in Germany. We approach 3,224 physician offices in the 79 largest cities in Germany with fictitious appointment requests and randomized patients’ characteristics. We find that patients’ ethnicity, as signaled by distinct Turkish versus German names, does not affect whether they receive an appointment or wait time. In contrast, patients with private insurance are 31 percent more likely to receive an appointment. Holding a private insurance also increases the likelihood of receiving a response and reduces the wait time. This suggests that physicians use leeway to prioritize privately insured patients to enhance their earnings, but they do not discriminate persons of Turkish origin based on taste. Still, their behavior creates means-based barriers for economically disadvantaged groups
    Keywords: Discrimination, immigrants, ethnicity, health care markets, health insurance, inequality, correspondence experiment, field experiment
    JEL: I11 J15 I14 I18 H51 C93
    Date: 2021–11
  11. By: Balke, Neele (University of Chicago); Lamadon, Thibaut (University of Chicago)
    Abstract: This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment in an economy with search frictions and firm commitment. We develop an equilibrium search model with worker and firm shocks and characterize the optimal contract offered by competing firms to attract and retain workers. In equilibrium, riskneutral firms provide only partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. We prove that there exists a unique spot target wage, which serves as an attraction point for smooth wage adjustments. The structural model is estimated on matched employer-employee data from Sweden. The estimates indicate that firms absorb persistent worker and firm shocks, with respective passthrough values of 27 and 11%, but price permanent worker differences, a large contributor (32%) to variations in wages. A large share of the earnings growth variance can be attributed to job mobility, which interacts with productivity shocks. We evaluate the effects of redistributive policies and find that almost 40% of government-provided insurance is undone by crowding out firm-provided insurance.
    Keywords: wages; salary;
    JEL: J31
    Date: 2021–12–17
  12. By: Jiri Podpiera
    Abstract: Distance, as a proxy for trade barriers, is found in many studies to matter even for weightless cross-border financial investments and lending, possibly due to the presence of information asymmetries. Its importance is tested in this paper using exports of all five broad categories of the U.K.’s financial and insurance services. No trade barriers are found for the bulk of the U.K.’s exports. Trade barriers are confirmed only for interest-bearing activities – being in line with available results in the literature. The positive effect of EU membership appears to be small. Notwithstanding the uncertainties, it suggests that post-Brexit disruptions of the U.K.’s export of financial and insurance services may be minor.
    Keywords: Export; Gravity Model; Financial Services; Insurance; Censored Regression; insurance service; A. financial services; U.K.'s export; evidence from the United Kingdom; U.K.'s export value; Exports; Trade barriers; Service exports; Global
    Date: 2021–10–29
  13. By: Marcus Dillender; Lu G. Jinks; Anthony T. Lo Sasso
    Abstract: High health care prices contribute to the United States spending more on health care than any other country, but policies that reduce health care payments have the potential to lead to health care access issues if providers reduce their supply in response to reimbursement rate reductions. In this paper, we examine the impact of reimbursement rates on health care supply by studying a policy that reduced reimbursement rates by 30% in one of the highest-reimbursing workers' compensation insurance systems in the nation. Despite the large decrease in reimbursement rates, we find no evidence that the policy affected the amount of health care that injured workers receive or recoveries after injuries. Our estimates suggest that the policy reduced annual workers' compensation medical costs by over $400 million and indicate that providers may be operating on the inelastic portion of the supply curve for care paid for by high-reimbursing payers.
    JEL: H75 I11 J22
    Date: 2021–12
  14. By: Eisenkopf, Jana; Juranek, Steffen; Walz, Uwe
    Abstract: We investigate the differential effect of the COVID-19 shock to the stock market shock on the share prices of firms with different levels of ESG (Environmental, Social and Governance) scores. Thereby, we analyse whether and to what extent better ESG ratings provided insurance for investors in the stocks of those firms during this shock. We focus our analysis on the European market in which ESG investment plays a particularly important role. Using a broad sample of listed firms we provide mixed evidence. On the one hand, we show that immediately after the start of the shock firms with a higher ESG score outperformed their peers. On the other hand, this effect faded less than six weeks later. Given the quick recovery of the market our finding supports the idea that ESG stocks provide limited insurance in severe crises.
    Keywords: Responsible investment,ESG,stock market crisis,persistence
    Date: 2021
  15. By: Ismaïl, Safa
    Abstract: This study aims to estimate and analyze the impact of the determinants of health care access and consumption in Tunisia. The estimation is made using two models: the “Heckman selection model” and the “Two-part model”, using a representative sample of 25091 households from the National households’ survey of budget, consumption and living standards in 2015. Similar results were obtained for both models. Access to health care and Out-of-pocket health expenditure increase with the household’s standard of living. They increase also for individuals with chronic disease and for those with disabilities, for households with children under five years and in rural areas. Out-of-pocket health expenditure increases for elderly and decreases with health insurance coverage.
    Keywords: Out-of-pocket health expenditure; Health care access; Tunisia
    JEL: I1
    Date: 2021–12–25
  16. By: Giuseppe Attanasi (Université Côte d'Azur, France; GREDEG CNRS); Marta Ballatore (GREDEG CNRS; Université Côte d'Azur, France); Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Agnès Festré (GREDEG CNRS; Université Côte d'Azur, France; The Arctic University of Norway, Tromsø, Norway); Chris Ouangraoua (GREDEG CNRS; Université Côte d'Azur, France)
    Abstract: This study proposes an analysis of behavioral factors (attitudes toward risk, ambiguity and reduction of compound lotteries) as choice determinants of a blockchain-based car insurance smart contract (henceforth, BCT-based SC) vs. an ambiguous expert-based one. In a laboratory experiment, we develop a toy model representing such a choice and complement it with a questionnaire in order to collect data concerning participants’ demographics, personality traits, and car use experience. Our results can inform policies aimed at improving the understanding of BCT-based SC in the case of car insurance services. In particular, they advocate for designing ad hoc policies depending on user’s experience with cars.
    Keywords: Laboratory experiments, Blockchain, Smart contracts, Technology adoption, Risk, Ambiguity, Compound lottery
    JEL: C81 C83 C91 D81 D91
    Date: 2021–12

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