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on Insurance Economics |
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Issue of 2022‒06‒13
fourteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Victor Hernandez Martinez; Kaixin Liu |
| Abstract: | This paper argues that the value of unemployment insurance (UI) can be decomposed into a liquidity component and an insurance component. While the liquidity component captures the value of relieving the cost to access liquidity during unemployment, the insurance component captures the value of protecting the worker against a potential permanent future income loss. We develop a novel sufficient statistics method to identify each component that requires only the labor supply responses to changes in the potential duration of UI and severance payment and implement it using Spanish administrative data. We find that the liquidity component represents half of the value of UI, while the insurance component captures the remaining half. However, the relevance of each component is highly heterogeneous across different groups of workers. Poorer and wealthier workers are both similarly liquidity-constrained, but poorer workers place a higher value on UI because the insurance component is significantly more important for them. On the other hand, wealthier workers and workers with more cash-on-hand value additional UI equally, but the wealthier value its liquidity, while those with more liquidity care about its insurance value. Finally, from a welfare perspective, we show that extending the potential duration of Spain’s UI would increase welfare. However, in our counterfactual case where UI is complemented with the provision of liquidity, the optimal potential duration of Spain's UI should be lower than its current level. |
| Keywords: | Unemployment Insurance; Liquidity Constraints; Consumption Smoothing |
| JEL: | H20 J64 J65 |
| Date: | 2022–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:94239&r= |
| By: | Bert Van Roosebeke (International Association of Deposit Insurers); Ryan Defina (International Association of Deposit Insurers); Paul Manga (Kenya Deposit Insurance Corporation) |
| Abstract: | E-money is widespread in Kenya, especially through MPESA, a form of e-money stored on mobile phones and issued by Safaricom, a mobile network operator (MNO). Integration between the MPESA platform and the traditional banking system is increasing. Given the very high use-grade of MPESA throughout the population, it has reached critical importance in Kenya. In Kenya, e-money issuers must back their e-value with bank balances at commercial banks (float), through trust accounts. Deposit insurance does not cover a default of the e-money issuer. However, the Kenya Deposit Insurance Corporation aims at offering pass-through coverage in case of a default of the deposit-taking commercial bank holding the trust accounts. Pass-through coverage is confronted with a number of challenges, including regarding data on the identity of e-money users and their balances held. Also, the critical importance of MPESA raises questions as to how to deal with a potential default of the MNO and the role of deposit insurance in such a scenario. Looking forward, there is merit in further coordination amongst safety net participants as well as in the management of trust accounts and the strengthening of data-availability requirements to e-money issuers. |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:awl:finbri:6&r= |
| By: | Colleen Carey; Nolan H. Miller; David Molitor |
| Abstract: | Social Security Disability Insurance (DI) awards rise in recessions and fall in expansions, especially for older adults. Using Medicare administrative data for DI entrants between 1991 and 2015, we provide new evidence on the health of DI recipients who enter at different ages and points in the business cycle. We find that each percentage point increase in unemployment at the time of application corresponds to 4.2% more awards and 0.4% lower Medicare spending among new entrants. We then investigate whether this relationship is driven by changes in health, with deteriorating economic conditions making individuals less healthy, or by changes in the cost of entering DI. To separate these two channels, we leverage a feature of the DI determination process that sharply relaxes the eligibility criteria at ages 50 and 55. We find that marginal DI entrants have similar spending regardless of whether they were induced to enter by poor economic conditions or by the age discontinuities in the eligibility criteria. The findings suggest that changes in entry costs can fully account for cyclical DI entry. |
| JEL: | H51 J14 J68 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29988&r= |
| By: | Rachel Youssef (Federal Deposit Insurance Corporation); Rose Kushmeider (Federal Deposit Insurance Corporation); Diane Ellis (Federal Deposit Insurance Corporation) |
| Abstract: | Fintech is disrupting the traditional business model of deposit-taking institutions (DTIs), around which DIS have been designed and implemented. These new business models blur the lines between financial products and services offered within and outside the traditional financial system and have the potential to introduce confusion as to whether a product is guaranteed by the DIS. For example, in some jurisdictions, fintech firms directly compete with DTIs to provide lending and payment services, but are not covered by the deposit insurance system. In other jurisdictions, fintechs may offer their products and services in partnership with DTIs and as such may be covered by the DIS. Such innovation presents a challenge for deposit insurers around the issue of public awareness of deposit insurance coverage and ultimately brings into question the DIS’ role in supporting financial stability. |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:awl:finbri:1&r= |
| By: | Noelle Denny-Brown; Rebecca Coughlin; David Wittenburg; Isabel Musse; Heather Gordon; Shauna Robinson; Aleksandra Wec |
| Abstract: | This brief summarizes the experiences of treatment group members in reporting earnings and using the POD benefit offset. POD is a randomized controlled trial that tests two versions of new SSDI work rules with a control group that is subject to current law rules. |
| Keywords: | Social Security Disability Insurance, SSDI, demonstration project, randomized controlled trial, benefit offset, counseling services, POD, Promoting Opportunity Demonstration |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:aae701aa5f4a4e6482da2d24eda95e8c&r= |
| By: | Jessica Laird; Amanda Markovitz; Jelena Zurovac; Pragya Singh; Dana Petersen; Priya Shanmugam; Nikkilyn Morrison; et al. |
| Abstract: | The Appendices to the Fourth Annual Report provide detailed information about the data, methods, analyses, and findings from the independent evaluation of the first four years of CPC+ for the practices that began the model in 2017. |
| Keywords: | Comprehensive Primary Care Plus, advanced primary care, patient-centered medical home, Medicare fee-for-service, payment reform, utilization of healthcare services |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:fa628b6e628943cd8e64fbbda31e7a15&r= |
| By: | Lara Hulsey; Andrew Gothro; Joshua Leftin; Claire Smither Wulsin; Liana Washburn; Kelsey Chesnut; Leah Jennings |
| Abstract: | The demonstration of Direct Certification with Medicaid for Free and Reduced-Price Meals (DCM-F/RP) allows authorized States and school districts to use information from Medicaid data files to identify students eligible to receive meals under the NSLP and SBP for free or at a reduced price. |
| Keywords: | NSLP, SBP, direct certification, Medicaid, school meals |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:3233785ba21a411a8ec6c9a9800f1b42&r= |
| By: | Paola Crosetta (Financial Services Compensation Scheme) |
| Abstract: | The Financial Services Compensation Scheme (FSCS) is the UK’s statutory fund of last resort for customers of authorised financial services firms. It is an integrated compensation scheme covering not only deposits but also investment and insurance provision and intermediation, debt management, pensions, and home finance. FSCS is a statutory body created under the Financial Services and Markets Act 2000 (FSMA). FSCS does not provide coverage for electronic money (e-money). There is consumer protection for e-money and payment services via regulatory rules, but they are related to safeguarding requirements for customer funds. Any decision to extend FSCS coverage would be as a result of a legislative change and/or changes to regulatory rules and would be subject to public consultation. As of December 2020, there are around 1200 e-money and payments services firms operating in the UK. The growing presence of these players in the UK market brings challenges and opportunities for both consumers, who are increasingly dealing with these products, and regulators, as questions arise on how to best protect consumers if these providers, or the underlying institution holding the safeguarded funds, fail. |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:awl:finbri:4&r= |
| By: | David Coyne; Itzik Fadlon; Tommaso Porzio |
| Abstract: | We propose using penalized withdrawals from retirement savings accounts, identified from U.S. tax records, as a revealed-preference tool to characterize households' valuation of liquidity. A simple dynamic model formalizes the notion that the prevalence of withdrawals can be used to characterize American households' valuation of liquidity over time and space. We find pervasive evidence of high valuation of liquidity, hence that shocks are imperfectly insured. Declines in households' income lead to sudden, large, and persistent jumps in the probability of penalized withdrawals. Both local economic conditions and persistent household characteristics play an important role, with the average valuation of liquidity being higher in financially underdeveloped areas as well as in black communities which are plausibly marginalized from the credit market. Finally, applying our tool to the Great Recession, we find that more affected areas saw larger increases in penalized withdrawals, plausibly driven by tightening of local credit conditions. Our analysis offers a new tool to study the valuation of liquidity and our results point to sizable welfare gains from social insurance policies targeted at both households and locations over time. |
| JEL: | D14 D53 D61 E21 G51 H0 I38 J15 R1 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30007&r= |
| By: | ARRANZ-MUÑOZ José-María; GARCÍA-SERRANO Carlos; HERNANZ Virginia |
| Abstract: | The purpose of this report is to analyse the degree of universality of unemployment benefits across EU Member States. This study builds upon the conceptual framework to define and measure the universality of social protection from Muñoz de Bustillo et al. (2020), and upon Arranz et al. (2021), who operationalize and test on a pilot basis the previous analytical framework for an EU Member State (Spain). In the case of UB, coverage should be measured using a percentage rate of unemployed covered by unemployment benefits, and adequacy using a replacement rate during the unemployment spell, i.e. the proportion of pre-unemployment income that is maintained after t months of unemployment. We rely on EU-level data from Eurostat and the OECD and propose an approach for measuring the adequacy and coverage of UB across the EU, discussing the pros and cons of different indicators. The best indicators are aggregated into a synthetic index of universality of unemployment benefits for each Member State. The report concludes with a set of considerations and recommendations arising from the measurement process carried out. |
| Keywords: | social protection, universality, coverage, adequacy, unemployment benefits, unemployment insurance |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc129321&r= |
| By: | Immervoll, Herwig (OECD); Fernandez, Rodrigo (OECD); Hyee, Raphaela (Queen Mary, University of London); Lee, Jongmi (OECD); Pacifico, Daniele (OECD) |
| Abstract: | Social protection systems play a key stabilising role for individuals and societies, especially in the recent context of heightened uncertainties. Income stabilisation and related social policy objectives hinge on the extent to which social protection is accessible for those requiring support. This paper proposes a new empirical approach for quantifying the accessibility and value of income transfers following an earnings loss. It first presents a methodology for assessing support levels for jobless individuals in specific circumstances that allows for comparisons across countries and over time. It then illustrates the approach using longitudinal survey data in 16 OECD countries. The illustration focusses on differences in entitlements between people who were in "standard" and "non-standard" employment prior to joblessness. Results show that, prior to the COVID pandemic, income support gaps between standard and non-standard workers were often sizeable. For instance, in Korea, job losers with prior standard employment were nearly twice as likely to receive income support as otherwise similar individuals with a history of non-standard work. Gaps were also large in Italy and Portugal. By contrast, gaps were statistically insignificant in Australia, Austria, Belgium, Germany, Hungary and the United Kingdom. As these latter countries follow very different social protection strategies, results suggest that limiting support gaps for non-standard workers is achievable with different policy designs and targeting mechanisms. |
| Keywords: | cash benefits, social insurance, redistribution, poverty, coverage, adequacy |
| JEL: | I38 J65 H55 H53 C31 C35 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15289&r= |
| By: | Bert Van Roosebeke (International Association of Deposit Insurers); Ryan Defina (International Association of Deposit Insurers) |
| Abstract: | A growing number of central banks are considering the issuance of central bank digital currencies (CBDCs). Upon their introduction and depending on their exact design, CBDCs may have considerable consequences for deposit insurers as well. In the first of a set of papers, this Fintech Brief sets out four of the main motivations for issuing CBDCs. Acknowledging considerable divergences across jurisdictions, we find: CBDCs for the general public (“retail CBDCs†) would constitute a central bank liability and a form of digital cash. To the public, they would be an alternative to central bank issued cash and private money, such as bank deposits. A large and growing share of central banks are experimenting with retail CBDCs. Some 20% of central banks indicate that they are likely to issue a retail CBDC by 2026, 40% indicate this is “possible†. Short-term monetary policy considerations are unlikely to play a significant role in central banks’ motivation for CBDCs. Whereas central banks in emerging markets and developing economies note that CBDCs may contribute to promoting financial inclusion, in advanced economies, CBDCs are not the most straightforward instrument in doing so. The evolution of payments plays a pivotal role in developing CBDCs. Given the declining role of cash in some jurisdictions, CBDCs as a new form of central bank money may contribute to safeguarding trust in the public currency. However, the available CBDC amounts necessary for that purpose may cause conflicts with likely and financial-stability-related limits on the volume of CBDCs that individuals may hold. As CBDCs would offer an alternative payment solution, they would contribute to resilience in future payment markets that may be privately dominated. However, given their digital nature, CBDCs may well be subject to similar cybersecurity and other digital risks that apply to private payment systems. CBDCs may contribute to competition and efficiency in an otherwise oligopolistic market for payment services, dominated by BigTechs. While potentially challenging to implement, a regulatory or competition-law-based response may be possible and would be less intrusive than introducing a CBDC. Central banks face the risk of large-scale use by the public of private or public (i.e. CBDC) digital currencies, not denominated in the domestic currency. These currencies may play a decisive role in the economy, and if foreign-based, largely out of reach of domestic legislation. CBDCs and/or private payment solutions in the domestic currency may assist in mitigating this risk, given sufficient demand for these. |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:awl:finbri:5&r= |