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on Insurance Economics |
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Issue of 2010‒06‒18
ten papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Salchev, Petko; Hristov, Nikolai; Georgieva, Lydia |
| Abstract: | Following the adoption of the Health Insurance Law in Bulgaria (1999), which provided the legal framework for the development of the voluntary health insurance, several health insurance funds had been established. Bulgaria had two licensed voluntary health insurance funds in 2001; in 2003 their number grew to six; and in 2009 this number stands over twenty. Despite the increased number of funds in recent years, their share of healthcare spending stayed at 1-1.5%, which is below European average. To this date, there are no serious and profound studies in the field among the scientific community in Bulgaria. The economic data published by the Commission of Financial Surveillance (CFS), conforms to EC regulations, but do not allow non-specialists to assess realistically voluntary health insurance funds (VHIF). This article introduces a methodology for comparing VHIF and establishment of a complex index (Benchmark Index - BI) based on 5 groups of indicators, related to several available variables. This index is intended as a tool for analyzing the voluntary health insurance sector and managing resources through a set of analytic indicators and variables. It can be used to create a certain type of ranking of VHIF. |
| Keywords: | voluntary health insurance; market; comparing methods; benchmark index |
| JEL: | I11 G22 C42 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23065&r=ias |
| By: | Marcelo de Paiva Abreu (Pontifical Catholic University of Rio de Janeiro); Felipe Tamega Fernandes (Harvard Business School, Entrepreneurial Management Unit) |
| Abstract: | This paper surveys the formation and development of insurance business in Brazil. It describes its origins, from the colonial times and imperial era to recent events. Particular attention is given to regulatory changes, showing how they evolved in response to macroeconomic shocks that affected the Brazilian economy during this period. |
| Keywords: | Insurance, Brazil, Regulation |
| JEL: | G22 G38 L50 N46 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:10-109&r=ias |
| By: | Mitchell, Matthew; Zhang, Yuzhe |
| Abstract: | This paper studies the design of unemployment insurance when neither the searching effort nor the savings of an unemployed agent can be monitored. If the principal could monitor the savings, the optimal policy would leave the agent savings-constrained. With a constant absolute risk-aversion (CARA) utility function, we obtain a closed form solution of the optimal contract. Under the optimal contract, the agent is neither saving nor borrowing constrained. Counter-intuitively, his consumption declines faster than implied by Hopenhayn and Nicolini [4]. The efficient allocation can be implemented by an increasing benefit during unemployment and a constant tax during employment. |
| Keywords: | hidden savings; hidden wealth; repeated moral hazard; unemployment insurance. |
| JEL: | D86 J65 D82 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23214&r=ias |
| By: | Jan Boone; Carline Droge; Ilaria Mosca; Rudy Douven, |
| Abstract: | In countries like the US and the Netherlands health insurance is provided by private firms. These private firms can offer both individual and group contracts. The strategic and welfare implications of such group contracts are not well understood. Using a Dutch data set of about 700 group health insurance contracts over the period 2007-2008, we estimate a model to determine which factors explain the price of group contracts. We find that groups that are located close to an insurers’ home turf pay a higher premium than other groups. This finding is not consistent with the bargaining argument in the literature as it implies that concentrated groups close to an insurer’s home turf should get (if any) a larger discount than other groups. A simple Hotelling model, however, does explain our empirical results. |
| Keywords: | health insurance; health-plan choice; managed competition |
| JEL: | I11 L13 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:152&r=ias |
| By: | John Bailey Jones; Eric French |
| Abstract: | This paper provides an empirical analysis of the effects of employer-provided health insurance, Medicare, and Social Security on retirement behavior. Using data from the Health and Retirement Study, we estimate a dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that Medicare is important for understanding retirement behavior, and that uncertainty and saving are both important for understanding the labor supply responses to Medicare. Half the value placed by a typical worker on his employer-provided health insurance is the value of reduced medical expense risk. Raising the Medicare eligibility age from 65 to 67 leads individuals to work an additional 0.074 years over ages 60-69. In comparison, eliminating two years worth of Social Security benefits increases years of work by 0.076 years. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:nya:albaec:10-10&r=ias |
| By: | Lindbeck, Assar (Research Institute of Industrial Economics (IFN)); Persson, Mats (IIES) |
| Abstract: | In this paper we treat an individual’s health as a continuous variable, in contrast to the traditional literature on income insurance, where it is regularly treated as a binary variable. This is not a minor technical matter; in fact, a continuous treatment of an individual’s health sheds new light on the role and functioning of income insurance and makes it possible to capture a number of real-world phenomena that are not easily captured in binary models. In particular, moral hazard is not regarded as outright fraud, but as a gradual adjustment of the willingness to go to work when income insurance is available. Further, the model can easily encompass phenomena such as administrative rejection of claims and the role of social norms. It also gives a rich view of the desirability of insurance in the first place. |
| Keywords: | Moral hazard; Disability insurance; Sick pay; Work absence; Social norms |
| JEL: | G22 H53 I38 J21 |
| Date: | 2010–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0840&r=ias |
| By: | Cadogan, Godfrey |
| Abstract: | A new method of forecasting the pricing kernel, i.e., stochastic claim inflation or link ratio function, of incurred but not reported (IBNR) claims (in property casualty insurance) from residuals in a dynamic claims forecast model is presented. We employ a pseudo Kalman filter approach by using claims risk exposure estimates to reconstruct innovations in stochastic claims development. Whereupon we find that the pricing kernel forecast is a product measure of the innovations. We show how these results impact performance measurement including but not limited to risk-adjusted return on capital by and through insurance accounting relationships for adjusted underwriting results; and loss ratio or pure premium calculations. Additionally, we show how, in the context of Wold decomposition, diagnostics from our model can be used to compute signal to noise ratio for, and cross check, unobservable pricing kernels used to forecast claims. Furthermore, we prove that a single risk exposure factor connects seemingly unrelated specifications for loss link ratio, and claims volatility. |
| Keywords: | IBNR claims ladder; claims reserve forecast; stochastic claim inflation; claims risk exposure; link ratio function; property-casualty insurance; insurance accounting |
| JEL: | C53 G22 M49 |
| Date: | 2010–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23235&r=ias |
| By: | Min Zhang |
| Abstract: | This paper shows that the Mortensen-Pissarides search and matching model can be successfully parameterized to generate observed large cyclical fluctuations in unemployment and modest responses of unemployment to changes in unemployment insurance (UI) benefits. The key features behind this success are the consideration of the eligibility for UI benefits and the heterogeneity of workers. With the linear utilities commonly assumed in the Mortensen-Pissarides model, a fully rated UI system designed to prevent moral hazard has no effect on unemployment. However, the UI system in the United States is neither fully rated nor able to prevent workers with low productivity from quitting their jobs or rejecting employment offers to collect benefits. As a result, an increase in UI generosity has a positive, but realistically small, effect on unemployment. This paper answers the Costain and Reiter (2008) criticism to the Hagedorn and Manovskii (2008) strategy of adopting a high value of non-market activities to generate realistic business cycles with the Mortensen-Pissarides model. |
| Keywords: | Search, Matching, Moral Hazard, UI Entitlement, Equilibrium Unemployment, Labor Markets |
| JEL: | E24 E32 J64 |
| Date: | 2010–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-405&r=ias |
| By: | Sumner La Croix (University of Hawaii, Department of Economics); Kimberly Burnett (University of Hawaii, Department of Economics) |
| Abstract: | On 29 April 2010, the Hawai`i State Legislature passed HB 444, a measure that allows same-sex and opposite-sex couples to enter into civil unions. This report provides quantitative and qualitative measures of the impact of civil unions on the Hawai`i economy, Hawai`i businesses, and the State of Hawai`i’s budget. More specifically, we examine the effect of civil unions on tourism arrivals to Hawai`i; state government revenues and expenditures; employer provision of health insurance to civil union partners and their dependents; and the family with civil union partners. We conclude that the Legalization of civil unions in Hawai`i will have only a very minimal impact on any aspect of Hawai`i’s economy and state government operations. |
| Keywords: | civil union, health insurance, visitor arrivals, Hawai`i |
| JEL: | J12 K36 I18 |
| Date: | 2010–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201008&r=ias |
| By: | Kimberly Rollins (Department of Resource Economics, University of Nevada, Reno); Mimako Kobayashi (Department of Resource Economics, University of Nevada, Reno) |
| Abstract: | This paper contributes towards the development of an empirical approach applicable to contingent valuation to accommodate non-expected utility risk preferences. Combining elicitation approaches used in field experiments with contingent valuation, we embed an experimental design that systematically varies probabilities and losses across a survey sample in a willingness to pay elicitation format. We apply the proposed elicitation and estimation approaches to estimate the risk preferences of a representative homeowner who faces probabilistic wildfire risks and an investment option that reduces losses due to wildfire. Based on prospect theory, we estimate parameters of probability weighting, risk preferences and use individual characteristics as covariates for these parameters and as utility shifters. We find that risk preferences are consistent with prospect theory. We find that probability weighting may offer an explanation for respondents’ observed under investment in measures to reduce losses due to wildfire. |
| Keywords: | Prospect theory; Contingent valuation; Field experiment, Wildfire risk |
| JEL: | Q51 C93 D81 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:unr:wpaper:10-003&r=ias |