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on Insurance Economics |
|
Issue of 2011‒10‒22
eight papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Erlend Berg |
| Abstract: | Funeral insurance has existed at least since antiquity, and it remains popular in many parts of Africa today. Yet the study of funeral insurance as a distinct form of insurance has hitherto been neglected. This paper presents a model in which funeral insurance combines regular life insurance with a restriction on how the payout is spent. The model predicts that there is an intermediate range of income and wealth where funeral insurance is demanded. The prediction is tested on a nationally representative sample of black South African households, a setting where both life and funeral insurance are widely available. The model also gives conditions under which funeral insurance is not demanded at any level of income and wealth. This may explain why funeral insurance is less popular in developed countries, even among the relatively poor. |
| JEL: | D81 G22 O12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2011-16&r=ias |
| By: | Ekhosuehi Iyahen |
| Abstract: | This presentation outlines the potential for insurance to help with risk transfer for adaptation mechanisms to climate change. It discusses the availability of insurance and re-insurance as a source of financing (or at least reduction in risk of costs) for climate change adaptation. The presentation was given by an insurance agency staff that operates in the Caribbean. |
| Keywords: | Environment & Natural Resources :: Climate Change, Environment & Natural Resources :: Disasters |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:12678&r=ias |
| By: | Pashchenko, Svetlana; Porapakkarm, Ponpoje |
| Abstract: | One of the major problems of the U.S. health insurance market is that it leaves individuals exposed to reclassification risk. Reclassification risk arises because the health conditions of individuals evolve over time, while a typical health insurance contract only lasts for one year. A change in the health status can lead to a significant change in the health insurance premium. We study how costly this reclassification risk is for the welfare of consumers. More specifically, we use a general equilibrium model to quantify the implications of introducing guaranteed renewable contracts into the economy calibrated to replicate the key features of the health insurance system in the U.S. Guaranteed renewable contracts are private insurance contracts that can provide protection against reclassification risk even in the absence of consumer commitment or government intervention. We find that though guaranteed renewable contracts provide a good insurance against reclassification risk, the welfare effects from introducing this type of contracts are small. In other words, the presence of reclassification risk does not impose large welfare losses on consumers. This happens because some institutional features in the current U.S. system substitute for the missing explicit contracts that insure reclassification risk. In particular, a good protection against reclassification risk is provided through employer-sponsored health insurance and government means-tested transfers. |
| Keywords: | health insurance; reclassification risk; dynamic insurance; guaranteed renewable contracts; general equilibrium |
| JEL: | I11 G22 D91 D52 D58 D60 |
| Date: | 2011–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34189&r=ias |
| By: | Alan de BROMHEAD (Mansfield College, Oxford University); Karol Jan BOROWIECKI (Department of Economics, Trinity College Dublin) |
| Abstract: | This paper analyses the determinants of the demand for life insurance using sample data from the 1911 Census of Canada. We find that immigrants’ demand for life insurance was on average around seven percent lower than that of native born Canadians and varied depending on the time that elapsed since immigration. The results imply substantially lower risk aversion of immigrants and possibly indicate the importance of personal networks for informal risk sharing that could evolve over time. We also find that the value of life insurance held by immigrants increases with time elapsing since immigration and converge towards the value of individuals born in Canada. |
| Keywords: | Insurance, welfare, migration, Canada |
| JEL: | G22 J61 N31 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1511&r=ias |
| By: | Montserrat Guillén (Departament d'Econometria, Estadística i Economia Espanyola. RFA-IREA. University of Barcelona. Spain); Ana María Pérez-Marín (Departament d'Econometria, Estadística i Economia Espanyola. RFA-IREA. University of Barcelona. Spain); Montserrat Guillén (Departament d'Econometria, Estadística i Economia Espanyola. RFA-IREA. University of Barcelona. Spain) |
| Abstract: | This article focuses on business risk management in the insurance industry. A methodology for estimating the profit loss caused by each customer in the portfolio due to policy cancellation is proposed. Using data from a European insurance company, customer behaviour over time is analyzed in order to estimate the probability of policy cancelation and the resulting potential profit loss due to cancellation. Customers may have up to two different lines of business contracts: motor insurance and other diverse insurance (such as, home contents, life or accident insurance). Implications for understanding customer cancellation behaviour as the core of business risk management are outlined. |
| Keywords: | Policy cancellation, customer loyalty, profit loss, customer behavior. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2011-13&r=ias |
| By: | Daniel C. Hardy (International Monetary Fund); María J. Nieto (Banco de España) |
| Abstract: | We study the optimal joint design of prudential supervision and deposit guarantee regulations in a multi-country, integrated banking market, where policy-makers have preferences regarding profitability and stability of the banking sector. Non-coordinated policies will tend to yield too little supervision and too much deposit insurance. The paper concludes with recommendations on policy priorities in this area. |
| Keywords: | Deposit guarantees, bank supervision, cross-border coordination, EU |
| JEL: | F36 F59 G28 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1126&r=ias |
| By: | Jesse Rothstein |
| Abstract: | Nearly two years after the official end of the "Great Recession," the labor market remains historically weak. One candidate explanation is supply-side effects driven by dramatic expansions of Unemployment Insurance (UI) benefit durations, to as many as 99 weeks. This paper investigates the effect of these UI extensions on job search and reemployment. I use the longitudinal structure of the Current Population Survey to construct unemployment exit hazards that vary across states, over time, and between individuals with differing unemployment durations. I then use these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes. The various specifications yield quite similar results. UI extensions had significant but small negative effects on the probability that the eligible unemployed would exit unemployment, concentrated among the long-term unemployed. The estimates imply that UI benefit extensions raised the unemployment rate in early 2011 by only about 0.1-0.5 percentage points, much less than is implied by previous analyses, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates that are of greater policy concern. |
| JEL: | H53 I38 J64 J65 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17534&r=ias |
| By: | Robert L. Brown |
| Abstract: | This paper has been written to bring up to date materials in a monograph that was a part of the Butterworths series of monographs in social gerontology, in particular, the 1991 monograph entitled: Economic Security in an Aging Population (Brown, 1991). The paper reports on research that indicates that today’s retirees are doing very well in terms of their replacement ratios and that Canadian poverty rates among the elderly are low relative to OECD (Organization for Economic Co-operation and Development) countries. Government-sponsored plans have been strengthened either through explicit expansion (e.g., the Guaranteed Income Supplement (GIS)) or through the reform of the Canada/Quebec Pension Plans (C/QPP). Also important is the maturation of Employer-sponsored pension plans. However, for the latter, coverage rates are down. This has created concern that future generations of Canadian retirees may not be able to experience the standard of living that is the reality for today’s elderly. The paper concludes that the aging of the population is not the cause of the increased cost of health care and social security today. Even by 2031, when the entire baby boom will be aged 65+, the impact of population aging on costs will be manageable. The paper also discusses the affordability of these systems if the normal age at retirement were to rise. |
| Keywords: | Baby boom, old age security, Canada/Quebec pension plans, registered pension plans, registered retirement savings plans, health care cost |
| JEL: | J18 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:sedapp:285&r=ias |