nep-ias New Economics Papers
on Insurance Economics
Issue of 2022‒02‒21
fourteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. CGIAR research on agricultural insurance: Past achievements and future research priorities By Kramer, Berber; Ceballos, Francisco; Hazell, Peter; Timu, Anne G.
  2. Is agricultural insurance fulfilling its promise for the developing world? By Kramer, Berber; Hazell, Peter; Alderman, Harold; Ceballos, Francisco; Kumar, Neha; Timu, Anne G.
  3. Bond Insurance and Public Sector Employment By Natee Amornsiripanitch
  4. Neural calibration of hidden inhomogeneous Markov chains -- Information decompression in life insurance By Mark Kiermayer; Christian Wei{\ss}
  5. Who Increases Emergency Department Use? New Insights from the Oregon Health Insurance Experiment By Augustine Denteh; Helge Liebert
  6. Risk-sharing rules and their properties, with applications to peer-to-peer insurance By Denuit, Michel; Dhaene, Jan; Robert, Christian Y.
  7. Review and synthesis of IFPRI’s PIM funded program of work on agricultural insurance, 2012-2020 By Hazell, Peter; Timu, Anne G.
  8. The Prices That Commercial Health Insurers and Medicare Pay for Hospitals’ and Physicians’ Services By Congressional Budget Office
  9. Insurers’ investments before and after the Covid-19 outbreak By Federico Apicella; Raffaele Gallo; Giovanni Guazzarotti
  10. Healthcare expenditure progress in Tunisia: a qualitative analysis By Ismaïl, Safa
  11. Climate-smart crop insurance to promote adoption of stress-tolerant seeds: Midterm findings from a cluster randomized trial By Cecchi, Francesco; Chegeh, Joseph; Aredo, Samson Dejene; Kivuva, Benjamin; Kramer, Berber; Waithaka, Lilian; Waweru, Carol
  12. The Underappreciated Success of Home-Based Primary Care: Next Steps for CMS' Independence at Home By Laura Kimmey; Valerie Cheh
  13. The Effect of Medicaid Home and Community-Based Services on Health Outcomes By Liu, Yinan; Zai, Xianhua
  14. The Unintended Effect of Medicaid Aging Waivers on Informal Caregiving By Liu, Yinan; Zai, Xianhua

  1. By: Kramer, Berber; Ceballos, Francisco; Hazell, Peter; Timu, Anne G.
    Abstract: KEY MESSAGES • A recent external review of IFPRI’s research on agricultural insurance found that, since 2009, IFPRI has made important contributions to the literature on factors constraining farmers’ demand for agricultural insurance and on gender inclusiveness of insurance and, since 2015, has focused more specifically on developing new forms of insurance that can reduce basis risk at the farm level and make insurance more attractive to farmers. • IFPRI’s work on flexible insurance contracts, picture-based insurance, and bundling agricultural insurance with credit, seeds, and other agricultural services shows that well-designed insurance can significantly improve on standard index products, increase demand among smallholders, and lead to greater use of bundled inputs like improved seeds and climate-smart farming practices. • ILRI’s long-term success with its index-based livestock insurance (IBLI) product illustrates that an action-oriented approach aimed at working with strong implementing partners on the ground ensures that, when a product is successful, it has the potential to scale up quickly, leading to significant development impacts. • Important knowledge gaps that warrant further CGIAR research include: 1) segmenting product design and marketing strategies for different target groups, such as sustainable commercial insurance and inclusive insurance; 2) the value and optimal design of programs and policies to remove tail-end catastrophic risks, and of insurance more broadly within a more holistic risk management framework; and 3) cost-benefit analyses around the net social benefits of insurance subsidies, and how these subsidies can best be designed and targeted to achieve their purposes.
    Keywords: agricultural insurance; research; livestock insurance; insurance; livestock; risk management; public policies; picture-based insurance
    Date: 2021
  2. By: Kramer, Berber; Hazell, Peter; Alderman, Harold; Ceballos, Francisco; Kumar, Neha; Timu, Anne G.
    Abstract: Agricultural insurance has attracted considerable interest in recent years. Innovations in agricultural index insurance have raised expectations that the private sector can overcome shortcomings associated with more traditional indemnity-based products like multi-peril crop insurance, and contribute to strengthen agricultural risk management at scale across developing countries. This paper updates previous reviews on agricultural insurance but differs in that it goes beyond the prognosis that recent innovations can help make insurance more commercially viable. As such, it addresses two important challenges that have received limited attention. First, it distinguishes different types of farm households and recognizes that many are excluded from the insurance market, describing additional innovations that can help make insurance more accessible to these excluded groups. Second, it acknowledges that insurance for catastrophic risks is unaffordable for most farmers and summarizes new developments in disaster assistance and safety net programs that can provide broader protection against these risks.
    Keywords: agricultural insurance; technology; innovation; social safety nets; disasters; literature reviews; technological innovations; disaster assistance
    Date: 2021
  3. By: Natee Amornsiripanitch
    Abstract: This paper uses a unique data set of local governments’ bond issuance, expenditure, and employment to study the impact of the monoline insurance industry’s demise on local governments’ operations. To show causality, I use an instrumental variable approach that exploits persistent insurance relationships and the cross-sectional variation in insurers’ exposure to high-quality residential mortgage-backed securities. Governments associated with ailing insurers issued less debt, cut expenditures, and hired fewer workers. These effects are persistent. Partial equilibrium calculations show that affected governments’ aggregate expenditures and employment levels in 2017 would have been 6% to 10% higher if bond insurance had remained available
    Keywords: Bond insurance; municipal bonds; real effects; financial crisis
    JEL: E60 G00 G01 G22 H40 H70 J00
    Date: 2022–02–07
  4. By: Mark Kiermayer; Christian Wei{\ss}
    Abstract: Markov chains play a key role in a vast number of areas, including life insurance mathematics. Standard actuarial quantities as the premium value can be interpreted as compressed, lossy information about the underlying Markov process. We introduce a method to reconstruct the underlying Markov chain given collective information of a portfolio of contracts. Our neural architecture explainably characterizes the process by explicitly providing one-step transition probabilities. Further, we provide an intrinsic, economic model validation to inspect the quality of the information decompression. Lastly, our methodology is successfully tested for a realistic data set of German term life insurance contracts.
    Date: 2022–01
  5. By: Augustine Denteh (Department of Economics, Tulane University); Helge Liebert (Department of Economics, University of Zurich)
    Abstract: We provide new insights into the finding that Medicaid increased emergency department (ED) use from the Oregon experiment. Using nonparametric causal machine learning methods, we find economically meaningful treatment effect heterogeneity in the impact of Medicaid coverage on ED use. The effect distribution is widely dispersed, with significant positive effects concentrated among high-use individuals. A small group - about 14% of participants - in the right tail with significant increases in ED use drives the overall effect. The remainder of the individualized treatment effects is either indistinguishable from zero or negative. The average treatment effect is not representative of the individualized treatment effect for most people. We identify four priority groups with large and statistically significant increases in ED use - men, prior SNAP participants, adults less than 50 years old, and those with pre-lottery ED use classified as primary care treatable. Our results point to an essential role of intensive margin effects - Medicaid increases utilization among those already accustomed to ED use and who use the emergency department for all types of care. We leverage the heterogeneous effects to estimate optimal assignment rules to prioritize insurance applications in similar expansions.
    Date: 2022–01
  6. By: Denuit, Michel (Université catholique de Louvain, LIDAM/ISBA, Belgium); Dhaene, Jan (KU Leuven); Robert, Christian Y. (CREST)
    Abstract: This paper offers a systematic treatment of risk-sharing rules for insurance losses, based on a list of relevant properties. A number of candidate risk-sharing rules are considered, including the conditional mean risk-sharing rule proposed in Denuit and Dhaene (2012) and the newly introduced quantile risk-sharing rule. Their compliance with the proposed properties is established. Then, methods for building new risk-sharing rules are discussed. The results derived in this paper are shown to be helpful in the development of peer-to-peer insurance (or crowdsurance), as well as to manage contingent risk funds where a given budget is distributed among claimants.
    Keywords: Pooling ; peer-to-peer (P2P) insurance ; crowdsurance ; conditional mean risk-sharing rule ; quantile risk-sharing rule ; comonotonicity
    Date: 2021–11–23
  7. By: Hazell, Peter; Timu, Anne G.
    Abstract: This paper reviews and synthesizes IFPRI’s research program on agricultural insurance since 2009, a period that encompasses all the activities for which financial support from PIM was obtained during 2012-2020. The paper reviews activities that were undertaken, synthesizes and evaluates the research outputs, and uses case studies to assess some of the program’s development outcomes. The study also identifies knowledge gaps and suggests priorities for future research for IFPRI and the OneCGIAR on risk management and agricultural insurance. The methods used in this study were: a desk review of project documents, research outputs, and metrics on the use and influence of research outputs; and remotely conducted interviews with some IFPRI and PIM staff and individuals in partner organizations for select case studies.
    Keywords: agricultural insurance; agriculture; insurance; impact assessment; OneCGIAR; impact evaluation
    Date: 2021
  8. By: Congressional Budget Office
    Abstract: Commercial health insurers pay much higher prices for hospitals’ and physicians’ services than the Medicare fee-for-service (FFS) program does. In addition, commercial insurers’ prices increase more rapidly and vary much more, both among and within geographic areas, than Medicare FFS’s prices do. CBO looked at possible explanations for those differences, including market power and concentration, input prices, quality of care, and cost shifting.
    JEL: I11 I13 I18
    Date: 2022–01–20
  9. By: Federico Apicella (Bank of Italy); Raffaele Gallo (Bank of Italy); Giovanni Guazzarotti (Bank of Italy)
    Abstract: This paper examines the impact of the pandemic outbreak on Italian insurers’ investment decisions between 2017 and 2020. By adopting a unique security-by-security holding dataset, we test how the investments of insurance companies in a single security varies when its price changes. Our findings suggest that Italian insurers on average play a stabilizing role in financial markets by increasing their exposure to securities whose price has fallen. However, their ability to weather shocks diminished on average after the pandemic outbreak, arguably as the abrupt fall of asset prices reduced insurers’ balance sheet capacity to absorb short-term losses on their security holdings. Indeed, insurers’ investment decisions were heavily affected by capital considerations after the pandemic outbreak: insurers did not play a stabilizing role if they had a lower solvency level and for assets more exposed to the risk of an increase in capital absorption (e.g. BBB-rated corporate bonds). Finally, insurers reduced their exposure to securities whose price had fallen for assets relating to more volatile liabilities, such as life unit-linked portfolios.
    Keywords: insurance companies, investments, pandemic, financial stability, solvency ratio
    JEL: G01 G11 G22 G28
    Date: 2022–02
  10. By: Ismaïl, Safa
    Abstract: Improving health requires necessarily equitable funding. This study focuses on the evolution of health spending in Tunisia. Developments are observed between the years 2000 and 2015. Comparisons are made between Tunisia, other countries from North Africa and Middle East region (MENA) and France as a country with an efficient health insurance system. The results show that health spending in Tunisia is growing steadily, but State funding remains insufficient, which has affected the quality of health care provision in the public health sector. The financing of health in Tunisia is mainly based on out-of-pocket household expenditure, which obstructs the access to health care.
    Keywords: Health expenditure; Health financing; Out-Of-Pocket expenditure; Tunisia
    JEL: I14 I15
    Date: 2021–02–10
  11. By: Cecchi, Francesco; Chegeh, Joseph; Aredo, Samson Dejene; Kivuva, Benjamin; Kramer, Berber; Waithaka, Lilian; Waweru, Carol
    Abstract: Too often, smallholder farmers suffer severe financial consequences from extreme weather events, pests, and disease; and climate change will increase the frequency at which natural hazards occur. This poses a threat to livelihoods not only ex post, by reducing agricultural output and inducing farmers to sell their assets, keep children out of school or borrow at high rates; but also ex ante, by discouraging farmers from investing in high-return practices and technologies (Elbers et al., 2007). Innovative solutions are needed to help marginalized farmers prepare for these natural hazards. One solution, building upon decades of agricultural research for development, can be found in the breeding of crop varieties that are more tolerant to weather shocks, pests and disease. The resulting improvements in seed technology offer promising pathways to improve farmers’ adaptive capacity, crowd in investments in agriculture, and thereby enhance agricultural productivity (Emerick et al., 2016). At the same time, stress tolerance is not a bullet-proof solution against all hazards. Farming is risky by nature, and improved stress-tolerant varieties will not shield farmers from more severe hazards, or from risks for which stress tolerance was not an explicit breeding objective. Drought-tolerant varieties are, for instance, not necessarily disease tolerant as well. Improving resilience in the face of climate change will require a more complete solution, in which farmers invest in stress-tolerant varieties to reduce their exposure to moderate, manageable risks, whilst accessing other types of solutions, including financial services, to protect their livelihoods from more severe and catastrophic production risks. This project note describes the findings from a research program in Kenya that aims to design, implement, and evaluate more complete risk management solutions; in particular, a solution that promotes stress-tolerant crops and varieties using an innovative picture-based crop insurance (PBI) product. The note first describes this intervention and the study designed to measure its impacts, followed by an overview of key findings at midline. This will include insights on the scalability of picture-based claims settlement, opportunities for more gender-responsive program design, and demand for the insurance product. We conclude by describing key challenges faced whilst implementing these solutions and providing an outlook for the future.
    Keywords: KENYA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; insurance; seeds; smallholders; climate-smart agriculture; climate change; empowerment; gender; women; women's empowerment; risk; risk management; agricultural insurance; crop insurance; mobile telephones; technology; Picture-Based Crop Insurance (PBI); smartphones
    Date: 2021
  12. By: Laura Kimmey; Valerie Cheh
    Abstract: We appreciated reading Ornstein et al.'s commentary about the Centers for Medicare & Medicaid Services' (CMS) Independence at Home (IAH) demonstration. As the independent evaluator of the IAH demonstration, we would like to offer responses to some of their misleading statements based on Mathematica's reports available on CMS's website.
    Keywords: Independence at Home
  13. By: Liu, Yinan; Zai, Xianhua
    Abstract: The Medicaid Home and Community- Based Services (HCBS) program in the United States subsidizes the long-term care provided at home or in community-based settings for older adults. Little is known about how HCBS affects the well-being of the aging population. Using detailed information about health from the Health and Retirement Study (HRS) linked with state-level HCBS policy expenditures, we show that HCBS indeed helps older people avoid institutionalization and stay at home longer. Furthermore, the program is positively associated with the probability of older individuals reporting better mental health, especially among people with limited resources.
    Keywords: Medicaid HCBS,Long-Term Care,HRS,Health
    Date: 2022
  14. By: Liu, Yinan; Zai, Xianhua
    Abstract: Medicaid aging waivers incentivize older adults who need long-term care to stay at home rather than move into a nursing facility. However, this policy may inadvertently shift care burdens onto informal caregivers. Using data on state-level waiver expenditures from 1998 to 2014 linked with the restricted access Health and Retirement Study (HRS), this paper investigates whether program funding is associated with the probability that an HRS respondent provides informal care to her older parents. Changes to state-level policy funding produce a quasi-experiment, which allows us to use two-way fixed effects models to estimate a causal relationship between the program and informal caregiving. The findings show that a 10 percent increase in aging waiver expenditures increases the overall likelihood that an adult child becomes an informal caregiver to her parents by 0.1 percentage points (0.3 percent). The overall estimate is composed of differential effects on different types of care. The results show that the Medicaid aging waiver funding is positively associated with the likelihood of being an errands caregiver and a non-intensive caregiver who spends fewer hours providing care, but unrelated to the likelihood of providing personal care and intensive care. The findings are mainly driven by the mechanism that aging-at-home is more attractive supported by the aging waivers.
    Keywords: Medicaid Aging Waiver,Long-Term Care,HRS,Informal Care
    JEL: I18 J14 J18
    Date: 2022

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