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on Insurance Economics |
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Issue of 2022‒05‒02
eighteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Konstantin Kunze (Department of Economics, University of California Davis) |
| Abstract: | This paper exploits variation resulting from a series of federal and state Medicaid expansions between 1979 and 2014 to estimate the effects of child’s access to public health insurance on labor market outcomes of parents. The results imply that extended Medicaid eligibility of children leads to positive contemporaneous labor supply responses of both parents. The estimated effects are concentrated among mothers with non-white children and fathers with white children. |
| Keywords: | Labor Supply, Medicaid, Simulated Eligibility, Spillover Effects |
| JEL: | I13 I18 I38 J18 J21 J22 |
| Date: | 2022–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:cda:wpaper:349&r= |
| By: | Lucas Sato (IPC-IG) |
| Keywords: | social protection; social insurance; rural development; agricultural workers; Near East and North Africa |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:oparab:466&r= |
| By: | Reona Hagiwara (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: reona.hagiwara@boj.or.jp)) |
| Abstract: | Some medical demand is inelastic to price changes, but not all. In assessing the effects of public health insurance reform on welfare, I examine the role of medical demand elasticity by developing a computational general equilibrium life-cycle model of the Japanese economy. The model features individual heterogeneity in health, income, and wealth. If all medical demand is inelastic, reforming public health insurance by increasing copayments reduces welfare for all current generations. However, if some medical demand is elastic, as is empirically observed, such a reform would improve welfare for current young generations, including those with poor health and low income. Furthermore, future generations benefit from the reform and their welfare increases significantly. |
| Keywords: | Copayment Increase, Price Elasticity of Medical Demand, Welfare Effects, Overlapping Generations |
| JEL: | E21 H51 I13 I31 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:22-e-05&r= |
| By: | Pia, Medrano |
| Abstract: | The poor are the most vulnerable class to risks and shocks and yet are also the least likely to be insured. In this essay, I explore the relationship between insurance and poverty reduction using a nationally representative household panel data from the Philippines. I find that the main pathway through which insurance coverage diminishes vulnerability to poverty is by aiding already non-poor households from falling into poverty in the face of shocks. In contrast, insurance coverage is insignificant in aiding escape from poverty among already poor households. However, a difference-in-difference (DID) analysis that exploit the occurrence of super-typhoon Reming in 2006 in the Bicol region of the Philippines suggest that insurance coverage enabled poor households to escape from poverty in the face of a natural disaster. Hence, while insurance may not be a magic cure to fundamental roots of poverty, it remains a critical tool in diminishing the exposure to poverty of the most vulnerable sectors of Philippine society. |
| Keywords: | Insurance, Poverty, Shock |
| JEL: | I3 I32 R2 |
| Date: | 2022–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112399&r= |
| By: | Yevhen Havrylenko; Maria Hinken; Rudi Zagst |
| Abstract: | Equity-linked insurance products often have capital guarantees. Common investment strategies ensuring these guarantees are challenged nowadays by low interest rates. Thus, we study an alternative strategy when an insurance company shares financial risk with a reinsurance company. We model this situation as a Stackelberg game. The reinsurer is the leader in the game and maximizes its expected utility by selecting its optimal investment strategy and a safety loading in the reinsurance contract it offers to the insurer. The reinsurer can assess how the insurer will rationally react on each action of the reinsurer. The insurance company is the follower and maximizes its expected utility by choosing its investment strategy and the amount of reinsurance the company purchases at the price offered by the reinsurer. In this game, we derive the Stackelberg equilibrium for general utility functions. For power utility functions, we calculate the equilibrium explicitly and find that the reinsurer selects the largest reinsurance premium such that the insurer may still buy the maximal amount of reinsurance. Since in the equilibrium the insurer is indifferent in the amount of reinsurance, in practice, the reinsurer should consider charging a smaller reinsurance premium than the equilibrium one. Therefore, we propose several criteria for choosing such a discount rate and investigate its wealth-equivalent impact on the utilities of both parties. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.04053&r= |
| By: | Cellini, Stefano (University of Surrey); Menezes, Livia (University of Birmingham); Koppensteiner, Martin Foureaux (University of Surrey) |
| Abstract: | In this paper, we estimate the effect of maternal displacements during pregnancy on birth outcomes by leveraging population-level administrative data from Brazil on formal employment linked to birth records. We find that involuntary job separation of pregnant single mothers leads to a decrease in birth weight (BW) by around 28 grams (-1% ca.) and an increase in the incidence of low BW by 10.5%. In contrast, we find a significant positive effect on the mean BW and a decrease in the incidence of low BW for mothers in a marriage or stable union. We document more pronounced negative effects for single mothers with lower earnings and no effect for mothers in the highest income quartile, suggesting a mitigating role of self-insurance from savings. Exploiting variation from unemployment benefits eligibility, we also provide evidence on the mitigating role of formal unemployment insurance using a Regression Discontinuity design exploiting the cutoff from the unemployment insurance eligibility rule. |
| Keywords: | dismissals, birth outcomes, informal insurance, unemployment insurance |
| JEL: | D14 I10 J65 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15155&r= |
| By: | Soumya Sasidharan (Ph.D. Scholar, School of Business, P O BOX: 345050, MAHE, Dubai, DIAC, UAE Author-2-Name: V.K. Ranjith Author-2-Workplace-Name: Professor, Manipal Institute of Management, MAHE, Manipal, India Author-3-Name: Sunitha Prabhuram Author-3-Workplace-Name: Associate Professor, School of Business, PO BOX: 345050, MAHE, Dubai, DIAC, UAE Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - Sustainable insurance is the new concept that emerges in the current state, that every country adopting now. The objective of the study is to identify the insurance industry's role and contribution to promoting environmental sustainability. To outline sustainable insurance and sustainable/green products and services. Methodology – This paper explores the contribution of the insurance industry and its role in promoting environmental sustainability and social development. This is a theoretical paper, focused on the secondary sources of data from research publications, websites, books, journals, and articles. To achieve the objectives, this study will critically review previous literature and assess contemporary views from different perspectives. Findings – Various insurers are frequently focusing on their progress, enhancing their share of the market, and maintaining better risks to achieve marketplace success. Insurers should always be on the lookout for new ways to set themselves apart from the competition. The implication for insurers is that their actions matter a lot when it comes to environmental issues and providing green insurance solutions can open new business opportunities for the industry. The answer may lie in marketing new products related to potential climate change and the corresponding sustainability/green insurance. Novelty – Sustainable insurance is aimed primarily at developing innovative or green products and services, reducing risk, improving company efficiency, and supporting environmental, social, and financial sustainability. There hasn't been a general overview of the role of insurers in enhancing environmental sustainability and social development done yet. Theoretically, our work aids policymakers and other stakeholders in better understanding the role of insurers in enhancing environmental sustainability and social development. Type of Paper - Review" |
| Keywords: | Insurance, Sustainability, Green insurance, Green products and services, Sustainable Development |
| JEL: | G20 G22 G23 |
| Date: | 2021–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr191&r= |
| By: | Lluis, Stephanie; McCall, Brian |
| Abstract: | In this paper, we study the impact of increased unemployment insurance generosity in terms of additional weeks of benefits on a spouse's labour supply adjustments after the job loss of his/her partner. We exploit the longitudinal household format of the Canadian Labour Force Survey and the Survey of Labour and Income Dynamics to study the labour force transitions of each spouse over time and spousal labour supply responses arising from an added worker effect, whereby spousal labour supply increases following the partner's job loss. We examine whether the additional weeks of benefits offered by the Extended Weeks (EW) pilot, an initiative of the Employment Insurance program implemented in a subset of regions, had a differential impact on spousal labour supply adjustments. Employing a difference-in-differences (DiD) approach, the crowding-out effect of this increased EI generosity on spousal labour supply is identified. Our fixed-effect estimation results show a statistically significant added worker effect for women of 14 to 17 hours weekly following their partner's job loss if they are not eligible to receive EI benefits. The eligibility of employment insurance benefits reduces spousal labour supply among women by 3 to 6 hours per week, with a stronger effect among mothers. |
| Keywords: | Employment Insurance,Unemployment Insurance Weeks,Spousal LabourSupply,Added Worker Effect,Crowding-Out Effect |
| JEL: | J62 J65 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:clefwp:42&r= |
| By: | Koning, Pierre (Vrije Universiteit Amsterdam); Muller, Paul (Vrije Universiteit Amsterdam); Prudon, Roger (Free University Amsterdam) |
| Abstract: | Workers with fixed-term contracts typically have worse health than workers with permanent contracts. We show that these differences in health translate into a substantially higher (30%) risk of applying for disability insurance (DI) in the Netherlands. Using unique administrative data on health and labor market outcomes of all employees in the Netherlands, we decompose this differential into: (i) selection of workers types into fixed-term contracts; (ii) the causal impact of temporary work conditions on worker health; (iii) the impact of differential employer incentives to reintegrate ill workers; and (iv) the differential impact of labor market prospects on the decision to apply for DI benefits. We find that selection actually masks part of the DI risk premium, whereas the causal impact of temporary work conditions on worker health is limited. At the same time, the differences in employer commitment during illness and differences in labor market prospects between fixed-term and permanent workers jointly explain more than 80% of the higher DI risk. |
| Keywords: | disability insurance, temporary work, employer incentives, worker health |
| JEL: | J08 I1 J22 H53 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15173&r= |
| By: | Jonas Crevecoeur; Katrien Antonio; Stijn Desmedt; Alexandre Masquelein |
| Abstract: | Due to the presence of reporting and settlement delay, claim data sets collected by non-life insurance companies are typically incomplete, facing right censored claim count and claim severity observations. Current practice in non-life insurance pricing tackles these right censored data via a two-step procedure. First, best estimates are computed for the number of claims that occurred in past exposure periods and the ultimate claim severities, using the incomplete, historical claim data. Second, pricing actuaries build predictive models to estimate technical, pure premiums for new contracts by treating these best estimates as actual observed outcomes, hereby neglecting their inherent uncertainty. We propose an alternative one step approach suitable for both non-life pricing and reserving. As such we effectively bridge these two key actuarial tasks that have traditionally been discussed in silos. Hereto we develop a granular occurrence and development model for non-life claims that allows to resolve the inconsistency in traditional pricing techniques between actual, complete observations on the one hand and best estimates on the other hand. We illustrate our proposed model on a reinsurance portfolio, where large uncertainties in the best estimates originate from long reporting and settlement delays, low claim frequencies and heavy (even extreme) claim sizes. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.07145&r= |
| By: | Clark, Andrew E.; D'Ambrosio, Conchita; Lepinteur, Anthony |
| Abstract: | Job insecurity is one of the risks that workers face on the labour market. As with any risk, individuals can choose to insure against it. We here consider marriage as a way of insuring against labour-market risk. The 1999 rise in the French Delalande tax, paid by large private firms when they laid off workers aged 50 or over, led to an exogenous rise in job insecurity for the uncovered (younger workers) in the affected firms. A difference-in-differences analysis using French panel data reveals that this greater job insecurity for the under-50s led to a significant rise in their probability of marriage, and especially when the partner had greater job security, consistent with marriage providing insurance against labour-market risk. |
| Keywords: | marriage; insurance; employment protection; perceived job security; difference-in-differences |
| JEL: | I38 J13 J18 |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113928&r= |
| By: | Melissa Newham; Marica Valente |
| Abstract: | This paper estimates the impact of gifts - monetary or in-kind payments - from pharmaceutical firms on physicians' prescription decisions and drug costs in the US. Using exhaustive micro data on prescriptions for anti-diabetic drugs from Medicare Part D, we find that payments cause physicians to prescribe more brand drugs. On average, for every dollar spent, payments generate a $6 increase in drug costs. We then estimate heterogeneous causal effects via machine-learning methods. We find large heterogeneity in responses to payments across physicians. Differences are predominantly explained by the insurance coverage of patients: physicians prescribe more brand drugs in response to payments when patients benefit from subsidies that reduce out-of-pocket drug costs. Finally, we estimate that a gift ban would reduce drug costs to treat diabetes by 3%. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.01778&r= |
| By: | Baishuai Zuo; Chuancun Yin |
| Abstract: | In this paper, we define doubly truncated moment (DTM), doubly truncated skewness (DTS) and kurtosis (DTK). We derive DTM formulae for elliptical family, with emphasis on normal, student-$t$, logistic, Laplace and Pearson type VII distributions. We also present explicit formulas of the DTE (doubly truncated expectation), DTV (doubly truncated variance), DTS and DTK for those distributions. As illustrative example, DTEs, DTVs, DTSs and DTKs of three industry segments' (Banks, Insurance, Financial and Credit Service) stock return in London stock exchange are discussed. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.01091&r= |
| By: | Tobias Fissler; Silvana M. Pesenti |
| Abstract: | We propose a holistic framework for constructing sensitivity measures for any elicitable functional $T$ of a response variable. The sensitivity measures, termed score-based sensitivities, are constructed via scoring functions that are (strictly) consistent for $T$. These score-based sensitivities quantify the relative improvement in predictive accuracy when available information, e.g., from explanatory variables, is used ideally. We establish intuitive and desirable properties of these sensitivities and discuss advantageous choices of scoring functions leading to scale-invariant sensitivities. Since elicitable functionals typically possess rich classes of (strictly) consistent scoring functions, we demonstrate how Murphy diagrams can provide a picture of all score-based sensitivity measures. We discuss the family of score-based sensitivities for the mean functional (of which the Sobol indices are a special case) and risk functionals such as Value-at-Risk, and the pair Value-at-Risk and Expected Shortfall. The sensitivity measures are illustrated using numerous examples, including the Ishigami--Homma test function and applications to a non-linear insurance portfolio. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.00460&r= |
| 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 is beneficial to improve general health outcomes of older individuals. Our results find that HCBS generosity is positively associated with the probability of older individuals self-reporting better health status, mitigating functional mobility limitations, showing better emotional feelings, and increasing cognitive skills. In addition, these health benefits of HCBS differ across groups by resources and demographic characteristics. |
| Keywords: | Medicaid HCBS,Long-Term Care,Health |
| JEL: | I12 I18 I30 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1079&r= |
| By: | Yuanying Guan; Zhanyi Jiao; Ruodu Wang |
| Abstract: | The celebrated Expected Shortfall (ES) optimization formula implies that ES at a fixed probability level is the minimum of a linear real function plus a scaled mean excess function. We establish a reverse ES optimization formula, which says that a mean excess function at any fixed threshold is the maximum of an ES curve minus a linear function. Despite being a simple result, this formula reveals elegant symmetries between the mean excess function and the ES curve, as well as their optimizers. The reverse ES optimization formula is closely related to the Fenchel-Legendre transforms, and our formulas are generalized from ES to optimized certainty equivalents, a popular class of convex risk measures. We analyze worst-case values of the mean excess function under two popular settings of model uncertainty to illustrate the usefulness of the reverse ES optimization formula, and this is further demonstrated with an application using insurance datasets. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.02599&r= |
| By: | De Nardi, Mariacristina; Pashchenko, Svetlana; Porapakkarm, Ponpoje |
| Abstract: | What generates the observed differences in economic outcomes by health? How costly it is to be unhealthy? We show that health dynamics are largely driven by ex-ante fixed heterogeneity, or health types, even when controlling for one’s past health history. In fact, health types are the key driver of long spells of bad health. We incorporate these rich health dynamics in an estimated structural model and show that health types and their correlation with other fixed characteristics are important to account for the observed gap in economic outcomes by health. Monetary and welfare losses due to bad health over the life cycle are large, concentrated, and to a large extent due to factors pre-determined earlier in life. A large portion of the related monetary costs is due to income losses, especially for people of working age, while a substantial portion of the welfare losses arises because health affects life expectancy. |
| Keywords: | health, health insurance, medical spending, wealth-health gradient, life-cycle models |
| JEL: | E21 I14 |
| Date: | 2022–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112492&r= |
| By: | Benjamin Avanzi; Ping Chen; Lars Frederik Brandt Henriksen; Bernard Wong |
| Abstract: | In this paper we consider a company whose assets and liabilities evolve according to a correlated bivariate geometric Brownian motion, such as in Gerber and Shiu (2003). We determine what dividend strategy maximises the expected present value of dividends until ruin in two cases: (i) when shareholders won't cover surplus shortfalls and a solvency constraint (as in Paulsen, 2003) is consequently imposed, and (ii) when shareholders are always to fund any capital deficiency with capital (asset) injections. In the latter case, ruin will never occur and the objective is to maximise the difference between dividends and capital injections. Developing and using appropriate verification lemmas, we show that the optimal dividend strategy is, in both cases, of barrier type. Both value functions are derived in closed form. Furthermore, the barrier is defined on the ratio of assets to liabilities, which mimics some of the dividend strategies that can be observed in practice by insurance companies. Existence and uniqueness of the optimal strategies are shown. Results are illustrated. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.05139&r= |