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on Insurance Economics |
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Issue of 2022‒06‒27
fourteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | International Association of Deposit Insurers |
| Keywords: | deposit insurance, bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:awl:stands:2107&r= |
| By: | Isaac, Elliott (Tulane University); Jiang, Haibin (Tulane University) |
| Abstract: | The Affordable Care Act (ACA) introduced a premium tax credit to help low-income families purchase insurance and an individual mandate penalty to encourage purchasing insurance, but a couple’s total tax credit and mandate penalty may differ depending on whether they are married. We use a sample of married and cohabiting couples in the 2012–2017 American Community Surveys and leverage variation in the marriage subsidy created by the ACA’s premium tax credit, individual mandate, and Medicaid expansion. Using an instrumental variables approach, we estimate a significant though small positive marriage response that is robust to extensive controls and a placebo sample. |
| Keywords: | marriage, affordable care act, premium tax credit, individual mandate |
| JEL: | J12 I18 H24 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15331&r= |
| By: | Philippe De Donder; Marie-Louise Leroux; François Salanié |
| Abstract: | Advantageous (or propitious) selection occurs when an increase in the premium of an insurance contract induces high-cost agents to quit, thereby reducing the average cost among remaining buyers. Hemenway (1990) and many subsequent contributions motivate its advent by differences in risk-aversion among agents, implying different prevention efforts. We argue that it may also appear in the absence of moral hazard, when agents only differ in riskiness and not in (risk) preferences. We first show that profit-maximization implies that advantageous selection is more likely when markup rates and the elasticity of insurance demand are high. We then move to standard settings satisfying the single-crossing property and show that advantageous selection may occur when several contracts are offered, when agents also face a non-insurable background risk, or when agents face two mutually exclusive risks that are bundled together in a single insurance contract. We exemplify this last case with life care annuities, a product which bundles long-term care insurance and annuities, and we use Canadian survey data to provide an example of a contract facing advantageous selection. |
| Keywords: | Propitious selection, positive or negative correlation property, contract bundling, long-term care insurance, annuity. |
| JEL: | D82 I13 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:rsi:creeic:2203&r= |
| By: | Keiko Fukumori; Ayumi Arai; Tomoya Matsumoto |
| Abstract: | This study examines the determinants of smallholder farmers’ adoption of weather-index crop insurance, which is considered to be a promising means of mitigating the negative welfare impacts of crop loss caused by drought or excess rainfall. The study utilizes household survey data covering 495 smallholder farmers in rural Kenya. It finds that a better understanding of insurance, together with a significant positive effect of years of education, considerably increases insurance uptake. The evidence suggests that it is important to provide educational programs on new financial products when introducing such products to smallholder farmers. However, it also shows the limitations of this study by revealing how important proper study design is to draw reliable methodological impact evaluations. |
| Keywords: | agriculture, weather risk, weather-index insurance, rural households, Kenya, JEL (O12, O13, O33, G22) |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:jic:wpaper:230&r= |
| By: | Lindo, Jason M. (Texas A&M University); Regmi, Krishna (University of Oklahoma); Swensen, Isaac D. (Montana State University) |
| Abstract: | We document the effect of unemployment insurance generosity on divorce and fertility using an identification strategy that leverages state-level changes in maximum benefits over time and comparisons across workers who have been laid off and those that have not been laid off. The results indicate that higher maximum benefit levels mitigate the effects of layoffs. In particular, they mitigate increases in divorce associated with men's layoffs; increases in separations associated with women's layoffs; reductions in fertility associated with men's layoffs; and increases in fertility associated with women's layoffs. |
| Keywords: | unemployment insurance, job loss, marriage, divorce, fertility, gender, family |
| JEL: | J12 J13 J16 J65 H53 I38 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15267&r= |
| By: | Jim Been (Leiden University); Anne C. Gielen (Erasmus University Rotterdam); Marike Knoef (Leiden University); Gloria Moroni (Erasmus University Rotterdam) |
| Abstract: | Recent policies aiming to prolong worklives have increased older males’ labor supply. Yet, little is known about their intergenerational effects. Using unique Dutch administrative data covering three consecutive generations, this paper studies the impact of increased grandfathers’ labor supply following a reform in unemployment insurance for persons aged 57.5+ on grandchildren’s educational performance. We find that increased grandfathers’ labor supply increases grandchildren’s test scores in 6th grade. The effect is driven by substitution of grandparents’ informal care by formal childcare. |
| Keywords: | Intergenerational effects, labor supply, unemployment insurance, child care, child development |
| JEL: | J13 J14 J22 J26 J65 |
| Date: | 2022–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220033&r= |
| By: | Andrew E. Clark; Conchita D'Ambrosio; Anthony Lepinteur |
| Abstract: | Job insecurity is one of the risks that workers face on the labour market. As with any risk, individuals can choose to insure against it. We here consider marriage as a way of insuring against labour-market risk. The 1999 rise in the French Delalande tax, paid by large private firms when they laid off workers aged 50 or over, led to an exogenous rise in job insecurity for the uncovered (younger workers) in the affected firms. A difference-in-differences analysis using French panel data reveals that this greater job insecurity for the under-50s led to a significant rise in their probability of marriage, and especially when the partner had greater job security, consistent with marriage providing insurance against labour-market risk. |
| Keywords: | marriage, insurance, employment protection, perceived job security, difference-in-differences |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1778&r= |
| By: | Price V. Fishback |
| Abstract: | The safety nets in high-income countries before 1900 and in low-income countries today were based on savings and aid from extended family, friends, charities, churches, and small amounts from local governments. Mutual societies and eventually insurance companies offered insurance against lost earnings from sickness, injury, death, and old age. Germany led the way in mandating that employers provide benefits. Since 1900 higher income nations have sharply increased public and private social welfare expenditures to well over 20 percent relative to GDP. A large share of this rise has come in increases in aid to the elderly and health care expenses, often in the form of contributory social insurance financed by payroll taxes on workers and employers. Meanwhile, noncontributory transfer programs for the poor have risen relatively little. In most countries, the employer’s share of payroll taxes are higher than the worker’s share. There are some major countries who have followed a path of reliance on private programs, which are largely financed by employers. Probably the most striking feature of social welfare programs world-wide is the very large variation in expenditures relative to GDP, in the categories of spending, and in the mix of taxation, private programs, and government programs. |
| JEL: | H53 H55 I38 N40 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30067&r= |
| By: | Padma Sharma |
| Abstract: | During banking crises, regulators must decide between bailouts or liquidations, neither of which are publicly popular. However, making a comprehensive assessment of regulators requires examining all their decisions against their dual objectives of preserving financial stability and discouraging moral hazard. I develop a Bayesian latent class model to assess regulators on these competing objectives and evaluate banking and savings and loan (S&L) regulators during the 1980s crises. I find that the banking authority (FDIC) conformed to these objectives whereas the S&L regulator (FSLIC), which subsequently became insolvent, deviated from them. Timely interventions based on this evaluation could have redressed the FSLIC’s decision structure and prevented losses to taxpayers. |
| Keywords: | Bank failures; Bank resolution; Bailout; Liquidation; Savings and loans crisis; Markov Chain Monte Carlo (MCMC); Federal Deposit Insurance Corporation; Federal Savings and Loans Insurance Corporation (FSLIC); Bayesian inference; Discrete data analysis; Latent class models |
| JEL: | C11 C38 G21 G33 G38 |
| Date: | 2022–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:94189&r= |
| By: | Eduardo Ramos-P\'erez; Pablo J. Alonso-Gonz\'alez; Jos\'e Javier N\'u\~nez-Vel\'azquez |
| Abstract: | In general insurance companies, a correct estimation of liabilities plays a key role due to its impact on management and investing decisions. Since the Financial Crisis of 2007-2008 and the strengthening of regulation, the focus is not only on the total reserve but also on its variability, which is an indicator of the risk assumed by the company. Thus, measures that relate profitability with risk are crucial in order to understand the financial position of insurance firms. Taking advantage of the increasing computational power, this paper introduces a stochastic reserving model whose aim is to improve the performance of the traditional Mack's reserving model by applying an ensemble of Recurrent Neural Networks. The results demonstrate that blending traditional reserving models with deep and machine learning techniques leads to a more accurate assessment of general insurance liabilities. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.07334&r= |
| By: | Chen, Zezhun; Dassios, Angelos; Tzougas, George |
| Abstract: | In this paper, we present a new family of bivariate mixed exponential regression models for taking into account the positive correlation between the cost of claims from motor third party liability bodily injury and property damage in a versatile manner. Furthermore, we demonstrate how maximum likelihood estimation of the model parameters can be achieved via a novel Expectation-Maximization algorithm. The implementation of two members of this family, namely the bivariate Pareto or, Exponential-Inverse Gamma, and bivariate Exponential-Inverse Gaussian regression models is illustrated by a real data application which involves fitting motor insurance data from a European motor insurance company. |
| Keywords: | bivariate claim size modeling; regression models for the marginal means and dispersion parameters; motor third party liability insurance; expectation-maximization algorithm |
| JEL: | C1 |
| Date: | 2022–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115132&r= |
| By: | Wing Fung Chong; Runhuan Feng; Hins Hu; Linfeng Zhang |
| Abstract: | Cyber risk is an omnipresent risk in the increasingly digitized world that is known to be difficult to quantify and assess. Despite the fact that cyber risk shows distinct characteristics from conventional risks, most existing models for cyber risk in the insurance literature have been purely based on frequency-severity analysis, which was developed for classical property and casualty risks. In contrast, the cybersecurity engineering literature employs different approaches, under which cyber incidents are viewed as threats or hacker attacks acting on a particular set of vulnerabilities. There appears a gap in cyber risk modeling between engineering and insurance literature. This paper presents a novel model to capture these unique dynamics of cyber risk known from engineering and to model loss distributions based on industry loss data and a particular company's cybersecurity profile. The analysis leads to a new tool for allocating resources of the company between cybersecurity investments and loss-absorbing reserves. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.08435&r= |
| By: | Nübler, Laura; Busse, Reinhard; Siegel, Martin |
| Abstract: | Analyses of out-of-pocket healthcare spending often suffer from an inability to distinguish necessary from optional spending in the data without making further assumptions. We propose a two-dimensional rating of the spending categories often available in household budget survey data where we consider the requirement to pay for necessary healthcare as one dimension and the incentive to pay extra for additional services, higher quality options or more convenience as a second dimension to assess the distortionary potential of higher spending for additional healthcare or higher quality options. We use three waves of a large German Household Budget Survey and decompose the Kakwani-index of total out-of-pocket healthcare spending into contributions of the eleven spending categories available in our data, across which user charge regulations vary considerably. We compute and decompose Kakwani-indexes for the different spending categories to compare the degrees of regressiveness across them. The results suggest that categories with higher incentives for additional spending exhibit smaller contributions to the overall regressive effect of total out-of-pocket spending than categories where spending is presumably mostly on necessary and effective care. Assessing the consumer choice potential of different spending categories is important because extra spending among the better-off may outweigh necessary spending in aggregate expenditure data, and may also hint at potential inequalities in the quality of provided healthcare. |
| Keywords: | out-of-pocket spending on health,Kakwani index,consumer choice,mixed-methods,decomposition analysis,health insurance; Germany |
| JEL: | D63 H23 I13 I18 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:260395&r= |
| By: | Costa-Font, Joan (London School of Economics); Vilaplana-Prieto, Cristina (Universidad de Murcia) |
| Abstract: | Balancing caregiving duties and work can be both financially and emotionally burdensome, especially when care is provided to a spouse at home. This paper documents that financial respite for caregivers can influence individuals' early retirement decisions. We examine the effect of a reform extending long-term care (LTC) benefits (in the form of subsidies and supports) in Spain after 2007 on caregiving spouse's early retirement intention. We subsequently examine the effect of austerity spending cuts in 2012 reducing such publicly funded benefits, and we subsequent compare the estimates to the effects of an early retirement reform among private sector workers in 2013. We document evidence of a 10pp reduction in the early retirement intentions after the LTC reform even though the effect is heterogeneous by type of benefit. Consistently, austerity spending cuts in benefits are found to weaken retirement intentions. Our estimates suggest that cuts in caregiving subsidies exert a much stronger effect on early retirement intentions than actual early retirement reforms. |
| Keywords: | informal care, retirement, employment, long-term care, caregiving subsidies, home care |
| JEL: | I18 J14 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15339&r= |