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on Insurance Economics |
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Issue of 2015‒09‒05
eighteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | M. A. BEN HALIMA (Irdes et CEE); V. HYAFIL-SOLELHAC (Insee); M. KOUBI (Insee); C. REGAERT (Irdes) |
| Abstract: | In France, wage-replacement benefits that cover employee absences due to illness are financed via a three-tier system. The first tier includes per diem sickness benefits paid by the National Health Insurance scheme. The second tier consists of complementary private insurance coverage provided by the employer with respect to collective bargaining agreements. The third-tier is managed at the firm level and will not be addressed in this paper. This study is the first to examine the effects of the second tier. It aims at empirically estimating the effects of the level of complementary sickness benefits on the duration of sick leave spells. This level provides employees with complementary coverage that can significantly exceed basic benefit rates, but there are wide disparities between employee categories that can affect waiting times, benefit duration or even wage replacement rates. We use first an extremely detailed description of the allowance parameters for the 46 most representative collective agreements and second, the HYGIE database, a unique source of individual information on sick leaves, enriched with collective agreement allowance parameters. A piecewise constant discrete time proportional hazard model is estimated for all individuals in the sample according to socio-professional category, taking into account unobserved individual heterogeneity in order to test the effects of both the global level of allowance and its day by day marginal effects. The estimations confirm the effect of individual variables previously studied: gender, age, health status, department (sub-region), and year of establishment. Besides, the level of collective agreement provisions has a very significant and negative effect on the likelihood of leaving the sickness absence state. This effect varies according to the sub-period of sickness absence taken into account. It is also stronger among non-executive employees than among executives. |
| Keywords: | Absenteeism, Collective agreements, Daily allowances |
| JEL: | I18 J22 J31 C41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2015-05&r=all |
| By: | Mobarak, Ahmed Musfiq (Yale University); Rosenzweig, Mark (Yale University) |
| Abstract: | We estimate the general-equilibrium labor market effects of a large-scale randomized intervention in which we designed and marketed a rainfall index insurance product across three states in India. Marketing agricultural insurance to both cultivators and to agricultural wage laborers allows us to test a general-equilibrium model of wage determination in settings where households supplying labor and households hiring labor face weather risk. Consistent with theoretical predictions, we find that both labor demand and equilibrium wages become more rainfall sensitive when cultivators are offered rainfall insurance, because insurance induces cultivators to switch to riskier, higher-yield production methods. The same insurance contract offered to agricultural laborers smoothes wages across rainfall states by inducing changes in labor supply. Policy simulations based on our estimates suggest that selling insurance only to land-owning cultivators and precluding the landless from the insurance market (which is the current regulatory practice in India and other developing countries), makes wage laborers worse off relative to a situation where insurance does not exist at all. The general-equilibrium analysis reveals that the welfare costs of current regulation are borne by landless laborers, who represent the poorest segment of society and whose risk management options are the most limited. |
| JEL: | O13 O16 O17 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:yaleco:127&r=all |
| By: | Bailey, James (Creighton University); Webber, Douglas A. (Temple University) |
| Abstract: | By 2010, the average US state had passed 37 health insurance benefit mandates (laws requiring health insurance plans to cover certain additional services). Previous work has shown that these mandates likely increase health insurance premiums, which in turn could make it more costly for firms to compensate employees. Using 1996–2010 data from the Quarterly Census of Employment and Wages and a novel instrumental variables strategy, we show that there is limited evidence that mandates reduce employment. However, we find that mandates lead to a distortion in firm size, benefiting larger firms that are able to self-insure and thus exempt themselves from these state-level health insurance regulations. This distortion in firm size away from small businesses may lead to substantial decreases in productivity and economic growth. |
| Keywords: | health insurance, benefit mandates, self-insurance, interest groups, employment, firm size |
| JEL: | L51 I13 I18 J32 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9292&r=all |
| By: | Maria Victoria Anauati (Universidad de San Andrés); Sebastian Galiani (University of Maryland); Federico Weinschelbaum (Universidad de San Andrés) |
| Abstract: | The health landscape in Latin America and the Caribbean is changing quickly. The region is undergoing a demographic and epidemiological transition in which health problems are highly concentrated on noncommunicable diseases (NCDs). In light of this, the region faces two main challenges: (1) develop cost-effective policies to prevent NCD risk factors, and (2) increase access to quality healthcare in a scenario in which a large share of the labor force is employed in the informal sector. This paper describes both alternative interventions to expand health insurance coverage and their tradeoff with labor informality and moral hazard problems. The paper also focuses on obesity as a case example of a NCD, and emphasizes how lack of knowledge along with self-control problems would lead people to make suboptimal decisions related to food consumption, which may later manifest in obesity problems. |
| JEL: | I12 I13 I18 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0186&r=all |
| By: | Johannes Geyer; Thorben Korfhage |
| Abstract: | Germany introduced a new mandatory insurance for long-term care in 1995 as part of its social security system. It replaced a system based on means tested social welfare. Benefits from the long-term care insurance are not means tested and depend on the required level of care. The insurance provides both benefits in kind and cash benefits. The new scheme improved the situation for households to organize informal care at home. This was one goal of the reform since policymakers view informal care as a cost-saving alternative to formal care. This view however neglects possible opportunity costs of reduced labor supply of carers. We exploit this reform as a quasi-experiment and examine its effect on the labor supply of caregivers who live in the same household as the care recipient. We find strong negative labor market effects for men but not for women. We conduct a series of robustness tests and find results to be stable. |
| Keywords: | labor supply, long-term care, long-term care insurance, natural experiment, quasi-experiment |
| JEL: | J22 H31 I13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1500&r=all |
| By: | Johannes Geyer; Thorben Korfhage |
| Abstract: | Germany introduced a new mandatory insurance for long-term care in 1995 as part of its social security system. It replaced a system based on meanstested social welfare. Benefits from the long-term care insurance are not means tested and depend on the required level of care. The insurance provides both benefits in kind and cash benefits. The new scheme improved the situation for households to organize informal care at home. This was one goal of the reform since policymakers view informal care as a cost-saving alternative to formal care. This view however neglects possible opportunity costs of reduced labor supply of carers. We exploit this reform as a quasi-experiment and examine its effect on the labor supply of caregivers who live in the same household as the care recipient. We find strong negative labor market effects for men but not for women. We conduct a series of robustness tests and find results to be stable. |
| Keywords: | Labor supply, long-term care, long-term care insurance, natural experiment, quasi-experiment |
| JEL: | J22 H31 I13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp785&r=all |
| By: | Gilad Sorek |
| Abstract: | This paper provides first analysis of horizontal product differentiation in health care markets with option demand. I show that differentiation choices in option demand market differ from those obtained in spot markets analyzes. This is because option demand induces competition over inclusion under insurance coverage, whereas in spot markets providers are competing over the marginal consumers. In addition providers that are perceived as substitutes in the spot market - after exact medical needs reveal, may be perceived as complements in option market - before actual medical needs emerged. I show that in the model option demand market competition in simultaneous moves yields efficient horizontal differentiation and excessive investment in quality. Moreover I show that sequential moves result in asymmetric equilibrium with first mover-gains to the leading provider, too little horizontal differentiation and yet higher expected utility for consumers (compared with simultaneous moves). |
| Keywords: | Health Insurance; Option Demand; Product Differentiation |
| JEL: | I11 I13 L1 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2015-11&r=all |
| By: | F. Borel-Mathurin; P.-E. Darpeix; Q. Guibert; S. Loisel |
| Abstract: | We use a brand new data-set built from French supervisory reports to investigate the drivers of the participation rates (equivalent to annual yields) served on euro-denominated life-insurance contracts over the period 1999-2013. Our analysis confirms practitioners’ insight on the alignment with the 10-year French government bond and we analyze the departure of the participation rates away from this reference. Our data indicate that financial margins are more strictly targeted than participation. We find evidence that surrenders are fairly uncorrelated with participation, suggesting that other levers are used to monitor them. If higher asset returns can imply better yield for policyholders, riskier portfolios do not necessarily translate into better participation. |
| Keywords: | participation rate, taux de revalorisation, profit sharing policy, life insurance, panel data, regulatory database.. |
| JEL: | G22 G11 E21 E49 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:decfin:17&r=all |
| By: | Laurence C. Baker; M. Kate Bundorf; Daniel P. Kessler |
| Abstract: | We test whether the generosity of employer-sponsored health insurance facilitates the exercise of market power by hospitals. We construct indices of health plan generosity and the price and volume of hospital services using data from Truven MarketScan for 601 counties from 2001-2007. We use variation in the industry and union status of covered workers within a county over time to identify the causal effects of generosity. Although OLS estimates fail to reject the hypothesis that generosity facilitates the exercise of hospital market power, IV estimates show a statistically significant and economically important positive effect of plan generosity on hospital prices in uncompetitive markets, but not in competitive markets. Our results suggest that most of the aggregate effect of hospital market structure on prices found in previous work may be coming from areas with generous plans. |
| JEL: | I11 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21513&r=all |
| By: | Fradkin, Andrey (National Bureau of Economic Research); Panier, Frédéric (McKinsey&Co); Tojerow, Ilan (Free University of Brussels) |
| Abstract: | Young adults entering the labor force typically have little access to unemployment insurance or other formal insurance mechanisms. Instead, they rely on family insurance in the form of parental support to smooth consumption. We study the labor market response of Belgian young adults to decreases in parental support caused by parental job displacements. Our estimates correct for unobserved heterogeneity by using the timing of parental shocks before and after labor market entry. We find that a child whose parents lose a job prior to the child's labor market entry is, on average, induced to work 6% more in the 3 years following labor market entry than a child whose parents lose a job after the child's entry (where labor market entry is defined as the end of the child's full-time education). This effect is concentrated on the extensive margin, meaning that the child finds a job faster, and disappears within four years of entry. We find no evidence that parental support affects the quality of the initial job that entrants find. |
| Keywords: | labor supply, unemployment insurance, first-time job seekers, job quality, family insurance |
| JEL: | J13 J22 J64 J65 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9304&r=all |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper discusses findings of the Detailed Assessment of Observance on the Insurance Core Principles on Ireland. It highlights that the Central Bank of Ireland (CBI) has made significant progress in updating the regulatory regime, and the impending implementation of Solvency II (SII) is expected to address most of the regulatory gaps noted in the assessment. The Central Bank Supervision and Enforcement Act of 2013 has significantly enhanced CBI’s supervision and enforcement powers. CBI’s preparation for SII is well advanced, and a dedicated SII project has been in place since 2010. |
| Keywords: | Financial Sector Assessment Program;Reports on the Observance of Standards and Codes;Ireland;Ireland;Insurance supervision;Insurance regulations;insurance, insurers, reinsurance, central bank, governance |
| Date: | 2015–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/118&r=all |
| By: | Alicia H. Munnell; Anqi Chen |
| Abstract: | The 2015 Social Security Trustees Report assumes that – for just the third time since the automatic adjustments were adopted in 1975 – Social Security recipients will not receive a cost-of-living-adjustment (COLA) in 2016. The reason is that the Consumer Price Index is not expected to increase in the base period used to determine the COLA. The anticipated lack of a Social Security COLA will cause a flap in the Medicare program because, by law, the cost of higher Medicare Part B premiums cannot be passed on to most beneficiaries when they do not get a raise in their Social Security benefits. This flap also highlights the complicated interaction between Medicare premiums, which are generally deducted automatically from Social Security benefits, and the net benefit – the money available for non-health care expenditures. Because, for a number of reasons, the COLA does not fully reflect the increase in health care costs faced by the elderly, the net Social Security benefit does not keep pace with inflation. This brief explores the interaction of inflation, Medicare premiums, and Social Security benefits. The discussion proceeds as follows. The first section describes Social Security’s COLA. The second section describes how Medicare premiums are calculated and explains next year’s flap. The third reports that Medicare Part B premiums have increased more than twice as fast as the COLA and discusses three reasons why this differential matters for non-medical care spending. The final section concludes that, while the inflation adjustment in Social Security is extremely valuable, the rise in Medicare premiums undermines the ability of beneficiaries to maintain their purchasing power for non-health-care items. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2015-14&r=all |
| By: | Jennifer Brown (Northwestern University); Dylan Minor (Harvard Business School, Strategy Unit) |
| Abstract: | We examine misconduct in financial services. We propose a theory in which experts extract surplus based on the value of their firm's brand and their own skills. Using sales complaint data for insurance agents, we find that agents working exclusively for large branded firms are more likely to be the subject of justified sales complaints, relative to smaller independent experts, despite doing substantially less business. In addition, more experienced experts attract more complaints per year. |
| Keywords: | Misconduct, expert services, asymmetric information, credence goods, insurance, ethics. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:16-022&r=all |
| By: | Simas Kucinskas (VU University Amsterdam, the Netherlands) |
| Abstract: | I revisit the Diamond-Dybvig model of liquidity insurance in the presence of hidden trades. The key result is that in this environment deposit-taking banks are not necessary for the efficient provision of liquidity. Mutual funds are constrained efficient when supplemented with the same government liquidity regulation that is required to make a banking system constrained efficient. However, whereas banks are potentially subject to costly panics, mutual funds are not run-prone and hence superior from a welfare perspective if runs happen with a non-zero probability. |
| Keywords: | Liquidity creation; liquidity insurance; hidden trades; bank runs; mutual funds; narrow banking; financial stability |
| JEL: | D91 E61 G21 G23 G28 |
| Date: | 2015–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150101&r=all |
| By: | Rieger, M.; Wagner, N.; Bedi, A.S. |
| Abstract: | We study the impact of Universal Health Coverage (UHC) on various macroeconomic outcomes in Thailand using synthetic control methods. Thailand is compared to a weighted average of control countries in terms of aggregate health and economic performance over the period 1995 to 2012. Our results suggest that financial protection in Thailand has improved relative to its synthetic counterfactual. While out-of-pocket payments as a percentage of overall health expenditures decreased by 16.9 percentage points, annual government per capita health spending increased by $78. However, we detect no impact on total health spending per capita nor the share of the government budget allocated to health. We find positive health impacts as captured by reductions in infant and child mortality. The introduction of UHC has had no discernible impact on GDP per capita. Our results complement micro evidence based on within country variation. The counterfactual design implemented here may be used to inform other countries on the causal repercussions and benefits of UHC at the macroeconomic level. |
| Keywords: | macroeconomic impacts, synthetic control approach, Thailand |
| Date: | 2015–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:ems:euriss:78459&r=all |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper discusses key findings of the Financial System Stability Assessment on Bosnia and Herzegovina (BiH). The financial system in BiH is still dealing with the aftershocks of the global financial crisis as well as deep-seated vulnerabilities. A high system-wide nonperforming loan ratio reflects the impact of the crisis, low growth since then, and a history of lax lending policies. Bank governance problems, weak supervision powers, and related-party loans are obstacles to addressing asset quality problems and re-establishing bank profitability. Banking and insurance oversight have improved since the 2006 Financial Sector Assessment Program, but supervisors’ corrective and enforcement powers are weak and identifying ultimate beneficial owners and related-party lending is problematic. |
| Keywords: | Press releases;Reports on the Observance of Standards and Codes;Insurance;Liquidity management;Currency boards;Financial safety nets;Financial sector;Financial system stability assessment;Bosnia and Herzegovina;Capital markets;Banks;Bank resolution;Macroprudential Policy;bank, banking, risk |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/177&r=all |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | EXECUTIVE SUMMARY1 There are constraints on the ability of both banks and the Central Bank of Bosnia and Herzegovina (CBBH) to manage liquidity. The system lacks a central bank liquidity window, and the secondary market for government securities is also small and illiquid. Despite the existing infrastructure, money market and interbank markets are also relatively small, reflecting both high levels of bank liquidity and the fact that foreign banks’ internal risk management practices aim to minimize exposures vis-à-vis the domestically-owned banks. Given the currency board arrangement (CBA), the aforementioned limitations call for conservative liquidity management and liquidity buffers for banks. The use of reserve requirements should be better tailored towards prudential purposes. There is scope to amend the system to support systemic liquidity management. First, n times of stress, the CBBH could consider increasing the flexibility of RR holdings and introducing daily or period- minimum holding thresholds. This should be combined with higher penalty rates, accompanied by enhanced supervision, before sanctions are applied. Second, for the RR base, the CBBH should consider residual maturities and set a minimum daily requirement. Lastly, the CBBH should consider the adequacy of existing RR levels, since they were significantly lowered during the financial crises. Liquidity regulations should be streamlined and the adoption of the LCR would strengthen liquidity management. For the purpose of maturity calculations of liquidity ratios, it would important to take into account early deposit withdrawal options. The minimum liquidity ratio should be raised above the RR to ensure that it is binding. Upon adoption of the LCR, care would be needed in treating RRs as high quality liquid assets (HQLA), given their uncertain availability to meet liquidity pressures. Also, there could be a need to calibrate the haircut applied to public securities for the purposes of the LCR, given the shallow market, the assumptions for deposits/borrowed funds run-off rates, and the treatment of liabilities maturing after 30 days with a prepayment clause. Given the high level of euroization, currency-specific LCRs should also be considered. The banking agencies have statutory authority to require corrective actions by banks, but enforcement powers are limited. The agencies have developed guidance on the use of corrective powers, including setting out triggers for corrective actions based on breaches of capital, liquidity, and asset quality requirements. However, their authority to impose financial penalties for noncompliance, or to permanently suspend board members and controlling owners is limited, except under provisional administration. Similarly, the authority for replacing or restricting the powers of controlling owners outside of provisional administration is also limited. The deposit insurance framework is a relatively well developed paybox scheme, but further enhancements of the deposit insurance arrangements would be beneficial. |
| Keywords: | Macroprudential Policy;Liquidity management;Financial safety nets;Financial Sector Assessment Program;Bosnia and Herzegovina;Bank supervision;Banking sector;bank, banks, banking, insurance, deposit insurance |
| Date: | 2015–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/216&r=all |
| By: | Resul Cesur; Pınar Mine Güneş; Erdal Tekin; Aydogan Ulker |
| Abstract: | This paper examines the impact of universal, free, and easily accessible primary healthcare on population health as measured by age-specific birth and mortality rates, focusing on a nationwide socialized medicine program implemented in Turkey. The Family Medicine Program (FMP), launched in 2005, assigns each Turkish citizen to a specific state-employed family physician, who offers a wide range of primary healthcare services that are free-of-charge. Furthermore, these services are provided at family health centers, which operate on a walk-in basis and are located within the neighborhoods in close proximity to the patients. To identify the causal impact of the FMP, we exploit the variation in its introduction across provinces and over time. Our estimates indicate that the FMP caused large declines in mortality rates across all age groups with more pronounced impacts among infants and the elderly, and a moderate reduction in the birth rates, primarily among teenagers. Furthermore, the results are suggestive that the program has also contributed towards equalization in the mortality disparities across provinces. Our findings highlight the importance of a nationwide supply-side intervention on improving public health. |
| JEL: | I0 I1 I11 I13 I14 I18 J13 J14 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21510&r=all |