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on Insurance Economics |
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Issue of 2012‒09‒30
twelve papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Charles Michalopoulos; David Wittenburg; Dina A.R. Israel; Anne Warren |
| Keywords: | Uninsured, Social Security Disability Insurance, Health Insurance, Random Assignment |
| JEL: | I J |
| Date: | 2012–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:7527&r=ias |
| By: | Stoyanova, Rayna; Schlütter, Sebastian |
| Abstract: | Insurance regulation is typically aimed at policyholder protection. In particular, regulators attempt to ensure the financial safety of insurance firms, for example, by means of capital regulation, and to enhance the affordability of insurance, for example, by means of price ceilings. However, these goals are in conflict. Therefore, we identify situations in which regulators should be more concerned with safety or, alternatively, affordability. Our model incorporates default-risk-sensitive insurance demand, capital-related frictional costs, and imperfect risk transparency for policyholders. -- |
| Keywords: | Insurance Regulation,Regulatory Targets,Welfare,Opaqueness |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:1012&r=ias |
| By: | Westergård-Nielsen, Niels C. (Aarhus University); Pertold, Filip (Aarhus University) |
| Abstract: | We investigate the effect of firms' participation in an insurance scheme on the long-term sickness absence of their employees, using administrative records. In Denmark and several other European countries, firms are obliged to cover the first two weeks of sickness. The insurance scheme is provided by government authority and is designed to help small firms with the financial burden related to sickness absence of their workers. We use an exogenously-set threshold for the eligibility as a policy experiment. Using regression discontinuity in the fuzzy form, we show that sickness absence in insured firms is much more prevalent than in uninsured firms. Sickness spells in insured firms are shorter and the conditional probability to return back to work from sickness is much higher in insured firms. These results suggest that employees in insured firms are less monitored during the first two weeks and that their sickness is less serious. We demonstrate in the paper that the minimum cost of the present insurance scheme is similar to about 1100 man-years. On top of that comes a substantial cost to more short time sickness. |
| Keywords: | sickness absence, moral hazard, insurance for employers |
| JEL: | I12 J28 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6782&r=ias |
| By: | Zimmer, Anja; Gründl, Helmut; Schade, Christian |
| Abstract: | This paper empirically studies the impact of consumer reaction to default risk on an insurer's optimal solvency level. Using experimentally obtained data, we derive a price-default risk-demand-curve that serves as an input variable for the insurer's risk strategy. We show that an insurer should choose to be default-free rather than having even a very small default probability. This risk strategy is also optimal when assuming substantial transaction costs for risk management activities undertaken to achieve the maximum solvency level. -- |
| Keywords: | Behavioral Insurance,Risk Management of Insurance Companies |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:0611&r=ias |
| By: | Liu, Hong (Central University of Finance and Economics); Zhao, Zhong (Renmin University of China) |
| Abstract: | In 2007, China launched a subsidized voluntary public health insurance program, the Urban Resident Basic Medical Insurance, for urban residents without formal employment, including children, the elderly, and other unemployed urban residents. We estimate the impact of this program on health care utilization and expenditure using 2006 and 2009 waves of the China Health and Nutrition Survey. We find that this program has significantly increased the utilization of formal medical services. This result is robust to various specifications and multiple estimation strategies. However, there is no evidence that it has reduced out-of-pocket expenditure and some evidence suggesting that it has increased the total health care expenditure. We also find that this program has improved medical care utilization more for the elderly, for the low- and middle-income families, and for the residents in the relatively poor western region. |
| Keywords: | urban China, health insurance, health care utilization, health expenditure |
| JEL: | G22 H43 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6768&r=ias |
| By: | Helmut Farbmacher;; Joachim Winter |
| Abstract: | When health insurance reforms involve non-linear price schedules tied to payment periods (for example, a quarter or a year), the empirical analysis of its effects has to take the within-period time structure of incentives into account. The analysis is further complicated when demand data are obtained from a survey in which the reporting period does not coincide with the payment period. We illustrate these issues using as an example a health care reform in Germany which imposed a perquarter fee of e10 for doctor visits and additionally set an out-of-pocket maximum. This co-payment structure results in an effective "spot" price for a doctor visit which decreases over time within each payment period. Using this variation, we find a substantial effect of the new fee, in contrast to earlier studies of this reform. Overall, the probability of visiting a physician decreased by around 2.5 percentage points in response to the new fee for doctor visits. We verify the key assumptions of our approach using a separate data set of insurance claims in which the reporting period effects are absent by construction. |
| Keywords: | health economics; non-linear pricing; response behavior; natural experiment |
| JEL: | I11 I18 D12 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:12/15&r=ias |
| By: | Hanewald, Katja; Post, Thomas; Gründl, Helmut |
| Abstract: | Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we develop a dynamic asset-liability model to assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in this stochastic simulation framework are driven by a GDP-linked variant of the Lee-Carter mortality model. Furthermore, interest rates and stock prices react to changes in GDP, which itself is modelled as a stochastic process. Our simulation results show that insolvency probabilities are significantly higher when the reaction of mortality rates to changes in GDP is incorporated. -- |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:0111&r=ias |
| By: | Fischer, Katharina; Schlütter, Sebastian |
| Abstract: | The standard formula of the Solvency II framework employs an approximate value-at-risk approach to define risk-based capital requirements. The parameterization of the standard formula determines how much additional capital insurers need in order to back investments in risky assets. This paper investigates how the standard formula's stock risk calibration influences the equity position and investment strategy of a shareholder-value-maximising insurance company. Intuitively, a higher stock risk parameter should reduce the insurer's risky investments as well as his insolvency risk. However, by considering the insurer's equity level as an endogenous variable, we identify situations in which a stricter stock risk calibration leads to a significant reduction of stock investments, but leaves the actual solvency level virtually unaffected, since the insurer also lowers his equity capital position. While previous articles only deal with the statistical accuracy of the standard formula's calibration, our results shed light on the incentives resulting from different calibrations. -- |
| Keywords: | solvency regulation,capital requirements,asset allocation,insurer default risk |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:0912&r=ias |
| By: | Philip J. Grossman; Mana Komai |
| Abstract: | We report results from a multi-period game designed to stimulate anti-social preferences and to measure the cost of to a society with members who act on these preferences. There are a number of important features of our game that, while individually not unique, in total distinguish it from previous games used to examine anti-social preferences. The unique feature of our design is that it addresses the two negative effects of anti-social preferences: the wasteful expenditure of resources in an attempt to harm others and the wasteful use of resources by the targets of antisocial actions in an attempt to protect themselves. We report evidence of anti-social preferences; those who were less well-off attack those who were better off, but the pattern of attacks is more complicated than suggested by available theory. We find within class attacks to be the most common type of attack observed. Relative standing within a type seems to be the motivation. Rich players are motivated in their attacks by a desire to move up in ranking within their type, while the poor players are motivated in their attacks by a desire to avoid moving down in ranking within their type. Finally, as wasteful as attacks are, spending on protection against attacks, while individually rational, results in even more waste. Subjects purchased insurance at twice the rate of attacks. Within our laboratory society, players acting on their anti-social preferences reduce total economic welfare by approximately 20 per cent. |
| Keywords: | anti-social preferences, insurance, envy |
| JEL: | C91 D03 D6 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2012-21&r=ias |
| By: | Youjin Hahn |
| Abstract: | I investigate how changes in fees paid to Medicaid physicians affect take-up among children in low-income families. The existing literature suggests that the low level of Medicaid fee payments to physicians reduces their willingness to see Medicaid patients, thus creating an access-to-care problem for these patients. For the identical service, current Medicaid reimbursement rates are only about 65 percent of those covered by Medicare. Increasing the relative payments of Medicaid would increase its perceived value, as it would provide better access to health care for Medicaid beneficiaries. Using variation in the timing of the changes in Medicaid payment across states, I find that increasing Medicaid generosity is associated with both an increase in take-up and a reduction in uninsured rate. These results provide a partial answer to the puzzling question of why many low-income children who are eligible for Medicaid remain uninsured. |
| Keywords: | Medicaid; Take-up; Medicaid payment; Medicaid reimbursement; Access to care |
| JEL: | I11 I18 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2012-29&r=ias |
| By: | Jonathan Halket; Michael Amior |
| Abstract: | Are households more likely to be homeowners when �housing risk� is higher? We show that homeownership rates and loan-to-value (LTV) ratios at the city level are strongly negatively correlated with local house price volatility. However, causal inference is confounded by house price levels, which are systematically correlated with housing risk in an intuitive way: in cities where the land value is larger relative to the local cost of structures, house prices are higher and more volatile. We disentangle the contributions of high price levels from high volatilities by building a life-cycle model of homeownership choices. The model is able to explain much of the cross-city dispersion in homeownership and LTV. We find that higher price levels explain the lower homeownership, while higher risk explains the lower LTV in high land value cities. The relationship between LTV and risk highlights the importance of including other means of incomplete insurance in models of homeownership. Finally, we use the model to show why regression-based inferences about the effect of risk on homeownership are biased. |
| Date: | 2012–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:718&r=ias |
| By: | Eleonora Fichera; Hugh Gravelle; Mario Pezzino; Matt Sutton |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1218&r=ias |