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on Insurance Economics |
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Issue of 2022‒02‒28
24 papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Ceballos, Francisco; Kramer, Berber |
| Abstract: | Smallholder farmers in developing countries generally lack access to affordable agricultural insurance, in part because of high loss verification costs and asymmetric information in indemnity insurance and basis risk in index-based insurance. Advances in remote sensing and other digital technologies can help overcome these challenges by allowing for low-cost, remote loss verification, and settling claims based on observed visible damage in a farmer’s fields. By effectively proxying for indemnity insurance, however, such a product may be subject to moral hazard and adverse selection. We test these hypotheses leveraging the rollout of picture-based crop insurance among smallholder farmers in northwestern India. We find no evidence of moral hazard or adverse selection, and that the use of technologies increases willingness to pay. We conclude that digital technologies are a valuable tool to provide low cost, sustainable crop insurance remotely, at lower levels of basis risk than index products. |
| Keywords: | INDIA; SOUTH ASIA; ASIA; risk; insurance; crop insurance; mobile equipment; technology; crops; farmers; smallholders; agricultural insurance; field experimentation; moral hazard; adverse selection; asymmetric information; Picture-Based Crop Insurance |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:2088&r= |
| By: | Daniel S. Grossman ⓡ; Sebastian Tello-Trillo ⓡ; Barton Willage ⓡ |
| Abstract: | A rich literature documents the benefits of social safety net programs for children. This paper focuses on an unexplored margin: how children’s programs impact parents’ well-being. We explore changes in children’s public health insurance and its effects on parents’ economic and behavioral outcomes. Using a simulated eligibility for Medicaid eligibility expansions in the 1980s and 1990s, we isolate variation in children’s Medicaid eligibility due to changes in government policies. We find that increases in children’s Medicaid eligibility increases the likelihood a mother is married, decreases her labor market participation, and reduces her smoking and alcohol consumption. Our findings suggest improved maternal well-being as measured by the Center for Epidemiological Studies-Depression score, a proxy for mental health. These results uncover a new link that provides an important mechanism, parental well-being, for interpreting the literature’s findings on the long-term, short-term, and intergenerational effects of Medicaid coverage. |
| JEL: | I1 I13 I14 I18 J10 J12 J18 J20 J21 J22 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29661&r= |
| By: | Hamark, Jesper (Department of Economic History, School of Business, Economics and Law, Göteborg University); John, Lapidus (Department of Economic History, School of Business, Economics and Law, Göteborg University) |
| Abstract: | How do unions who support universal welfare such as public employment insurance reason when they introduce private solutions such as obligatory complementary income insurance (OCII)? Unions are important actors in shaping the welfare model. Their actions and arguments tell a lot about how and why welfare state changes take place. In this paper, we seek answers to how the unions have acted and argued on OCII, how these actions and arguments have changed over time and whether there are differences across unions within the same confederation and across different confederations. The material includes congressional minutes and other internal documents for the period 2000–2020. Further, a number of newspapers and union magazines are studied. What we find and systematise is a myriad of arguments for and against OCII, some of them referring to the eroded public unemployment insurance and others pointing towards sharp competition between unions to keep or to recruit new members. |
| Keywords: | Unions; public unemployment insurance; obligatory complementary income insurance; welfare models; Swedish welfare model |
| JEL: | I30 J51 J65 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunhis:0029&r= |
| By: | Harris, Timothy F. (Illinois State University); Yelowitz, Aaron (University of Kentucky); Talbert, Jeffery (University of Kentucky); Davis, Alison (University of Kentucky) |
| Abstract: | The employer-sponsored life insurance (ESLI) market is particularly susceptible to adverse selection due to community-rated premiums, guaranteed issue coverage, and the existence of a well-functioning individual market as a substitute. Using administrative payroll and healthcare claims data from a large university, we find evidence of adverse selection in the supplemental ESLI market. Employees in worse health, as measured by the Charlson's Comorbidity Index, are more likely to elect coverage than those in better health. Nonetheless, we also find that employees typically do not increase coverage following diagnosis of a severe illness even when they can without providing evidence of insurability. Furthermore, demand estimation shows that employees are not price-sensitive and that the estimated increases in premiums due to adverse selection are unlikely to cause significant welfare loss. |
| Keywords: | adverse selection, employer-sponsored life insurance |
| JEL: | D82 G22 J33 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14985&r= |
| By: | Paul Goldsmith-Pinkham; Karen Jiang; Zirui Song; Jacob Wallace |
| Abstract: | We propose a method for reporting how program evaluations reduce gaps between groups, such as the gender or Black-white gap. We first show that the reduction in disparities between groups can be written as the difference in conditional average treatment effects (CATE) for each group. Then, using a Kitagawa-Oaxaca-Blinder-style decomposition, we highlight how these CATE can be decomposed into unexplained differences in CATE in other observables versus differences in composition across other observables (e.g. the "endowment"). Finally, we apply this approach to study the impact of Medicare on American's access to health insurance. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.05672&r= |
| By: | Tristan Jourde |
| Abstract: | This paper examines the long-term evolution of the linkages of the insurance sector with financial and non-financial companies. We develop a measure of connectedness using a multifactor model of weekly equity returns. The empirical analysis is conducted from 1973 to 2018, for 16 developed countries, at both the sectoral and institution levels. The results indicate that, unlike other sectors, the connectedness level of the insurance industry has strengthened over time. We also find that the linkages of the largest insurance companies with financial and non-financial firms are structurally different but as high as those of the largest banks. |
| Keywords: | Comovements, Insurance Sector, Interconnectedness, Macroprudential Regulation, Systemic Risk |
| JEL: | G22 G15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:857&r= |
| By: | Jody Schimmel Hyde; Amal Harrati |
| Abstract: | This paper examines the alignment between self-reported and administrative records of applications to and receipt of federal disability benefits. It uses data from the Health and Retirement Study. |
| Keywords: | Disability, Social Security Disability Insurance, Supplemental Security Income, SSI, SSDI, Health and Retirement Study, HRS, administrative linkage |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:3927392b09da40bab812827aa5714c4e&r= |
| By: | Salah Nebbache (Ecole Supérieure de Commerce –Koléa, (Algérie)) |
| Abstract: | The insurance sector in developed countries occupies a vital place in their economies and contributes to the country's development. This market, like so many others, is doomed to failure, at best, to stagnation. It must therefore be resilient to the economic situation and boost itself to growth. This paper aims to investigate the impact of the double crisis associated with the exceptional economic situation as well as the pandemic on the Algerian insurance sector. The findings reveal that the sector's employment is shrinking, along with a decline in insurance company recruitments. Furthermore, the overall market output is down, notably in the automotive insurance and assistance branches. |
| Abstract: | Le secteur des assurances dans les pays développés occupe une place primordiale dans leurs économies et contribue à l'essor du pays. Ce secteur, comme tant d'autres, est voué à l'échec, au mieux à la stagnation. Il doit donc s'adapter à la conjoncture et aspirer à se positionner sur la tangente de la croissance. L'objectif de l'article est d'examiner l'impact de la double crise liée, à la fois, à la situation économique exceptionnelle et à la crise sanitaire pandémique sur le secteur algérien des assurances. Les résultats montrent que l'effectif du secteur marque une régression qui coïncide avec un recul des recrutements opérés par les sociétés d'assurance. Aussi, la production globale du marché marque une baisse notamment dans les branches assurance automobile, et assistance. |
| Keywords: | secteur des assurances,double crise,recul,production,branches d'assurance Code Jel : G22,O16 insurance sector,double crisis,decline,market output,branches of insurance JEL Classification Codes : G22,O16 |
| Date: | 2021–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03507045&r= |
| By: | Duggan, Mark (Stanford University); Guo, Audrey (Santa Clara University); Johnston, Andrew C. (University of California, Merced) |
| Abstract: | The tax base for state unemployment insurance (UI) programs varies significantly in the U.S., from a low of $7,000 annually in California to a high of $52,700 in Washington. Previous research has provided surprisingly little guidance to policy makers regarding the tradeoffs associated with this variation. In this paper, we use 37 years of data for all 50 states and Washington, D.C. to estimate the impact of the UI tax base on labor-market outcomes. We find that the low tax base that exists in California and many other states (and the necessarily higher tax rates that accompany these) negatively affects labor market outcomes for part-time and other low-earning workers. |
| Keywords: | unemployment insurance, tax base, payroll taxes, experience rating |
| JEL: | D22 H22 H25 H71 J23 J32 J38 J65 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15020&r= |
| By: | Jessica Ross; Kristie Liao; Andrea Wysocki |
| Abstract: | This report presents Medicaid section 1915(c) waiver program expenditures and participation trends for fiscal years 2017 and 2018. |
| Keywords: | Medicaid, long-term services and supports (LTSS), home and community-based services (HCBS), Medicaid Section 1915(c) Waivers, CMS 372 Annual Report, expenditures |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:d7a1926aa4894c73bb198d28a23d49d7&r= |
| By: | Gabriel Chodorow-Reich; Peter Ganong; Jonathan Gruber |
| Abstract: | We model automatic trigger policies for unemployment insurance by simulating a weekly panel of individual labor market histories, grouped by state. We reach three conclusions: (i) policies designed to trigger immediately at the onset of a recession result in benefit extensions that occur in less sick labor markets than the historical average for benefit extensions; (ii) the ad hoc extensions in the 2001 and 2007-09 recessions in total cover a similar number of additional weeks as common proposals for automatic triggers, but concentrate coverage more in weaker labor markets; (iii) compared to ex post policy, the cost of common proposals for automatic triggers is close to zero. |
| JEL: | E24 E32 E62 H53 J65 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29703&r= |
| By: | Caitlin Murray; Alena Tourtellotte; Debra Lipson; Andrea Wysocki |
| Abstract: | This report presents Medicaid long term services and supports (LTSS) expenditures for fiscal year 2019. |
| Keywords: | Medicaid, long term services and supports, LTSS, home and community based services, HCBS, expenditures |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:a4688ff58f2b4827adb56a6e271d92ce&r= |
| By: | Bhalotra, Sonia (University of Warwick); Fernandez, Manuel (Universidad de los Andes & IZA) |
| Abstract: | We investigate supply-side barriers to medical care in Colombia, where citizens have a constitutional right to health, but insurance companies impose restrictions. We use administrative data on judicial claims for health as a proxy for unmet demand. We validate this using the health services utilization register, showing that judicial claims map into large, pervasive decreases in medical consultations, procedures, hospitalizations and emergency care. This manifests in population health outcomes. We identify increases in mortality pervasive across cause, age and sex, with larger increases for cancer, individuals over the age of fifty, women and the poor. JEL Classification: G22 ; I11 ; I13 ; I18 ; K38 ; K42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wqapec:11&r= |
| By: | Katja Hanewald; Hazel Bateman; Hanming Fang; Tin Long Ho |
| Abstract: | This paper explores new mechanisms to fund long-term care using housing wealth. Using data from an online experimental survey fielded to a sample of 1,200 Chinese homeowners aged 45-64, we assess the potential demand for new financial products that allow individuals to access their housing wealth to buy long-term care insurance. We find that access to housing wealth increases the stated demand for long-term care insurance. When they could only use savings, participants used on average 5% of their total (hypothetical) wealth to purchase long-term care insurance. When they could use savings and a reverse mortgage, participants used 15% of their total wealth to buy long-term care insurance. With savings and home reversion, they used 12%. Reverse mortgages do not require regular payments until the home is sold, while home reversion involves a partial sale and leaseback. Our results inform the design of new public or private sector programs that allow individuals to access their housing wealth while still living in their homes. |
| JEL: | D14 G11 G21 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29689&r= |
| By: | Ralph S. J. Koijen; Motohiro Yogo |
| Abstract: | Insurers are the largest institutional investors of corporate bonds. However, a standard theory of insurance markets, in which insurers maximize firm value subject to regulatory or risk constraints, predicts no allocation to corporate bonds. We resolve this puzzle in an equilibrium asset pricing model with leverage-constrained households and institutional investors. Insurers have relatively cheap access to leverage through their underwriting activity. They hold a leveraged portfolio of low-beta assets in equilibrium, relaxing other investors' leverage constraints. The model explains recent empirical findings on insurers' portfolio choice and its impact on asset prices. |
| JEL: | G12 G22 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29679&r= |
| By: | Tzougas, George; Hong, Natalia; Ho, Ryan |
| Abstract: | In this article we present a class of mixed Poisson regression models with varying dispersion arising from non-conjugate to the Poisson mixing distributions for modelling overdispersed claim counts in non-life insurance. The proposed family of models combined with the adopted modelling framework can provide sufficient flexibility for dealing with different levels of overdispersion. For illustrative purposes, the Poisson-lognormal regression model with regression structures on both its mean and dispersion parameters is employed for modelling claim count data from a motor insurance portfolio. Maximum likelihood estimation is carried out via an expectation-maximization type algorithm, which is developed for the proposed family of models and is demonstrated to perform satisfactorily. |
| Keywords: | claim frequency; EM algorithm; non-life insurance; regression structures on the mean and dispersion parameters |
| JEL: | C1 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113616&r= |
| By: | Fuhao Lou |
| Abstract: | China has been developing very fast since the beginning of the 21st century. The net income of households has been increased a lot as well. Nonetheless, migration from rural areas to urban sectors tends to keep a high saving rate instead of consumption. This essay tries to use the conventional Ordinary Least Square regression, along with the method of Instrument Variable to test the problem of endogeneity, to discover the relationship between the saving rates of rural households and labor migration, controlling for other characteristic variables including having insurance, marital status, education, having children, health conditions. The assumption is that migration contributes positively to the dependent variable, meaning that migration could increase the household save rates. However, the conclusion is that it is negatively with the household save rates. All the other variables regarding education, health conditions, marital status, insurance, and number of children are negatively related with the household saving rates. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.07159&r= |
| By: | Battulga Gankhuu |
| Abstract: | In this paper, we introduced a dynamic Gordon growth model which is augmented by Bayesian Markov--Switching Vector Autoregressive (MS--BVAR) process. Using the risk-neutral valuation method and locally risk-minimizing strategy, we obtained pricing and hedging formulas for European call and put options, Margrabe option, segregated fund, and unit-linked life insurance on dividend-paying assets. It is assumed that the regime-switching process is generated by a homogeneous Markov process and the residual process follows a heteroscedastic model. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.06012&r= |
| By: | Seck, Ndeye Arame (Université catholique de Louvain, LIDAM/ISBA, Belgium); Denuit, Michel (Université catholique de Louvain, LIDAM/ISBA, Belgium) |
| Abstract: | Number and location of knots strongly impact on fitted values obtained from spline regression methods. P-splines have been proposed to solve this problem by adding a smoothness penalty to the log-likelihood. This paper aims to demonstrate the strong potential of A-splines (for adaptive splines) proposed by Goepp et al. (2018) for dealing with continuous risk features in insurance studies. Adaptive ridge is used to remove the un-necessary knots from a large number of candidate knots, yielding a sparse model with high interpretability. Two applications are proposed to illustrate the performances of A-splines. First, death probabilities are graduated in a Binomial regression model. Second, continuous risk factors are included in a Poisson regression model for claim counts in motor insurance. The move from technical to commercial price list can easily be achieved by switching to A-splines of degree 0, i.e. piecewize constant functions. |
| Keywords: | Generalized Additive Models ; Penalized Likelihood ; Adaptive Ridge ; Banding |
| Date: | 2021–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:aiz:louvad:2021035&r= |
| By: | Rauh, C.; Santos, M. R. |
| Abstract: | This paper studies the impact of existing and universal transfer programs on vacancy creation, wages, and welfare using a search-and-matching model with heterogeneous agents and on-the-job human capital accumulation. We calibrate the general equilibrium model to match key moments concerning unemployment, wage and wealth distributions, as well as the distribution of EITC and transfers. In addition, unemployment insurance benefits are related to pre-unemployment earnings and subject to exhaustion, after which agents can only rely on transfers and savings. First, we show that existing transfers hamper economic activity but provide sizeable welfare gains. Next, we show that a universal basic income of nearly $12,500 to each household per year, which replaces all existing transfer programs and unemployment benefits, can lead to small aggregate welfare gains. These welfare gains mostly accrue to less skilled individuals despite their sizable fall in wages, and the overall rise in skill premia and wage inequality. Albeit the extra burden of higher taxes to finance UBI, we show that the increased action in hiring is a key channel though which outcomes for low education groups improve with the reform. However, if we keep the UI benefits in place, the positive effects on job creation vanish and UBI does not improve upon the current system. |
| Keywords: | Transfer programs, EITC, Means-tested transfers, Welfare programs, Labor supply, On-the-job human capital accumulation, Life cycle, Inequality, Universal basic income, UBI, Unemployment, General equilibrium |
| Date: | 2022–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2205&r= |
| By: | Lambert, Philippe (Université catholique de Louvain, LIDAM/ISBA, Belgium) |
| Abstract: | Data on a continuous variable are often summarized by means of histograms or displayed in tabular format: the range of data is partitioned into consecutive interval classes and the number of observations falling within each class is provided to the analyst. Computations can then be carried in a nonparametric way by assuming a uniform distribution of the variable within each partitioning class, by concentrating all the observed values in the center, or by spreading them to the extremities. Smoothing methods can also be applied to estimate the underlying density or a parametric model can be fitted to these grouped data. For insurance loss data, some additional information is often provided about the observed values contained in each class, typically class-specific sample moments such as the mean, the variance or even the skewness and the kurtosis. The question is then how to include this additional information in the estimation procedure. The present paper proposes a method for performing density and quantile estimation based on such augmented information with an illustration on car insurance data. |
| Keywords: | Nonparametric density estimation ; grouped data ; sample moments ; risk measures |
| Date: | 2021–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:aiz:louvad:2021039&r= |
| By: | Alt, James E.; Jensen, Amalie; Larreguy, Horacio; Lassen, David D.; Marshall, John |
| Abstract: | While social pressure is widely believed to influence voters, evidence that informa-tion passed between social ties affects beliefs, policy preferences, and voting behav-ior is limited. We investigate whether information about unemployment shocks dif-fuses through networks of strong and mostly weak social ties and influences voters in Denmark. We link surveys with population-level administrative data that logs un-employment shocks afflicting respondents’ familial, vocational, and educational net-works. Our results show that the share of second-degree social ties—individuals that voters learn about indirectly—that became unemployed within the last year increases a voter’s perception of national unemployment, self-assessed risk of becoming unem-ployed, support for unemployment insurance, and voting for left-wing political parties. Voters’ beliefs about national aggregates respond to all shocks equally, whereas sub-jective perceptions and preferences respond primarily to unemployment shocks afflict-ing second-degree ties in similar vocations. This suggests that information diffusion through social ties principally affects political preferences via egotropic—rather than sociotropic—motives. |
| Date: | 2022–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126516&r= |
| By: | Evelyn Li; Mynti Hossain; Boyd Gilman; Lauren Vollmer Forrow; Katie Morrison Lee; Randall Brown |
| Abstract: | Telehealth can be a valuable tool for nursing homes to enhance care coordination and provide timely access to care, leading to lower spending for nursing home residents. |
| Keywords: | Health Care Costs, Medicare, Nursing Homes, Program Evaluation, Technology Adoption/Diffusion/Use, Telehealth, Utilization of Services |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:7c85eb898a564a19ba9219c0247f38f3&r= |
| By: | Niklas Engbom; Gustavo Gonzaga; Christian Moser; Roberta Olivieri |
| Abstract: | Using rich administrative and household survey data spanning 34 years from 1985 to 2018, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil’s formal sector. Higher-order moments of the distribution of earnings changes show cyclical movements in Brazil that are similar to those in developed countries like the US. Relative to the formal sector, the informal sector is associated with a significant earnings penalty and higher earnings volatility for identical workers. Earnings changes of workers who switch from formal to informal (from informal to formal) employment are relatively negative (positive) and large in magnitude, dispersed, negatively (positively) skewed, and less leptokurtic. Our results suggest that informal employment is an imperfect insurance mechanism. |
| JEL: | D31 D33 E24 E26 J31 J46 J62 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29696&r= |