A Hard Look at “Soft” Cost‐control Measures in Healthcare Organizations: Evidence from Preferred Drug Policies in Germany

Cost‐control interventions that target physicians’ clinical discretion are common in healthcare, but evidence on their efficacy is scarce; in particular for “soft” policies when liability is unlikely to be enforced by the regulator. We study the effectiveness of preferred drug policies (minimum prescription quotas of specific “preferred” drugs) in altering physicians practice styles within the high volume drug class of HMG‐CoA‐reductase inhibitors (statins) in the German statutory health insurance system. Using a nationally representative panel of ambulatory care physicians between 2011 and 2014, we exploit the decentralized institutional setting to estimate physician respons..

Insurance Economics

Multiple Pricing for Health Care Services

This paper provides a theoretical model that captures the essential features of a Swedish health care reform where private and public health care providers serve patients with certain functional impairments, but where only private providers can reject service requests from patients. Since the hourly price compensation is fixed, this type of systems is expected to result in a monetary deficit for public providers (since they can not reject proposals from “unprofitable” patients). This paper proposes a more advanced pricing system and characterizes its optimal solution. A numerical analysis demonstrates that the deficit for the public provider can be substantially reduced without affecting..

Insurance Economics

Decrease of capital guarantees in life insurance products: can reinsurance stop it?

We analyze the potential of reinsurance for reversing the current trend of decreasing capital guarantees in life insurance products. Providing an insurer with an opportunity to shift part of the financial risk to a reinsurer, we solve the insurer's dynamic investment-reinsurance optimization problem under simultaneous Value-at-Risk and no-short-selling constraints. We introduce the concept of guarantee-equivalent utility gain and use it to compare life insurance products with and without reinsurance. Our numerical studies indicate that the optimally managed reinsurance allows the insurer to offer significantly higher capital guarantees to clients without any loss in the insurer's expected ut..

Insurance Economics

Cyber Risk Frequency, Severity and Insurance Viability

In this study an exploration of insurance risk transfer is undertaken for the cyber insurance industry in the United States of America, based on the leading industry dataset of cyber events provided by Advisen. We seek to address two core unresolved questions. First, what factors are the most significant covariates that may explain the frequency and severity of cyber loss events and are they heterogeneous over cyber risk categories? Second, is cyber risk insurable in regards to the required premiums, risk pool sizes and how would this decision vary with the insured companies industry sector and size? We address these questions through a combination of regression models based on the class of ..

Insurance Economics

COVID-19, Income Shocks and Female Employment

Existing evidence shows that the Covid-19 pandemic has led to employed women witnessing larger losses in the labor market in India. We examine the heterogeneity that underlie these trends by studying the impact of Covid-19 induced income shocks on female employment. Using individual level panel data and a difference-in-differences strategy that exploits lockdown timing (April 2020) and accounts for seasonal employment trends, we find that women in households facing a hundred percent reduction in household male income during the lockdown were 1.5 pp (25%) more likely to take up work during the "unlockdown" months (June-August 2020). We also find these results to be predominant in poorer and l..

Insurance Economics

Insurance Cover Among SC/ST Community as Compared to General Community of Rural Population.

ABSTRACT Insurance is vital to the households of a nation as it insulates them, to an extent from the unforeseen financial burdens. A well developed insurance sector is essential for the development of the nation, particularly the rural areas since the rural population being more vulnerable to calamities, income loss etc. Of the rural population, the SC/ST community being the less privileged, the study aims at assessing whether there is any significant difference in purchasing insurance between the general public and SC/ST community of rural areas. If there is, the study tries to explain what are the factors contributing to this and also the study gives an idea about the reach of socially or..

Insurance Economics

Too much trade: the hidden problem of adverse selection

Adverse selection famously leads to the crowding out of socially benecial trades. We show that even more trades may be simultaneously crowded in. The reason is that, in the absence of complete unravelling, \lemons" fetch more under adverse selection. It is demonstrated how these \bad" trades occur in insurance, credit and used-car markets, and some policy implications are discussed.

Insurance Economics

The impact of trust in the developing sector of microinsurance in South Africa

The aim of this paper is to investigates the influence of trust on insurance penetration in the developing Microinsurance sector of South Africa. Legacy issues and deeply rooted structural and institutional frailties have resulted in substandard levels of financial inclusion for low-income earners in the country. This segment of consumers is highly vulnerable to social, economic and as the covid-19 pandemic has proved, health shocks. Microinsurance has often been touted as a solution to improve resilience and turn the tide of significant adverse economic outcomes for the low-income segment. This paper explores the role of trust as a key construct for business success in the microinsurance se..

Insurance Economics

Index insurance for coping with drought-induced risk of production losses in French forests

Drought-induced risk of forest dieback is increasing due to climate change. Insurance can be a good option to compensate potential financial losses associated with forest production losses. In this context, we developed an ex ante index-based insurance model to cope with drought-induced risk of forest dieback. We applied this model to beech and oak forests in France. We defined and then compared different indices from simple ones relying on rainfall indices to more complex ones relying on the functional modelling of forest sensitivity to water stress. After the calibration of the contract parameters, an insurance scheme was optimized and tested. We showed that optimal insurance contracts gen..

Insurance Economics

Optimal insurance for time-inconsistent agents

We examine the provision of insurance against non-observable liquidity shocks for time-inconsistent agents who can privately store resources. When lack of self-control is strong enough, optimal contracts are similar to individual nancial accounts with remunerated savings and costly borrowing. The corresponding rate of return decreases with savings, which gives a theoretical rationale for pension accounts with decreasing incentive schemes, as implemented in most developed countries. Extending the model to an innite horizon, we show that, in the presence of repeated shocks, optimal contracts lead to impoverishment almost surely. Usury laws, capping interest rates, worsen this tendency to over-..

Insurance Economics

The Effect of Unemployment Benefit Pay Frequency on UI Claimants' Job Search Behaviors

This paper presents new evidence on how UI (Unemployment Insurance) benefit pay frequencies affect the job search behaviors of UI claimants in the United States. By exploiting quasi-experimental variations in states' benefit pay schedules, I find that switching from biweekly to weekly pay significantly increases UI claimants' unemployment durations. This observed effect can be partly rationalized by the more frequent end-of-the-month positive benefit shocks under weekly pay schedules. I conclude that the previously overlooked policy parameter, benefit pay frequency, has important effects on the job search behaviors of UI claimants.

Insurance Economics

Cyber contagion: impact of the network structure on the losses of an insurance portfolio

In this paper, we provide a model that aims to describe the impact of a massive cyber attack on an insurance portfolio, taking into account the structure of the network. Due to the contagion, such an event can rapidly generate consequent damages, and mutualization of the losses may not hold anymore. The composition of the portfolio should therefore be diversified enough to prevent or reduce the impact of such events, with the difficulty that the relationships between actor is difficult to assess. Our approach consists in introducing a multi-group epidemiological model which, apart from its ability to describe the intensity of connections between actors, can be calibrated from a relatively sm..

Insurance Economics

Insurance Companies and the Growth of Corporate Loan Securitization

Collateralized loan obligation (CLO) issuances in the United States increased by a factor of thirteen between 2009 and 2019, with the volume of outstanding CLOs more than doubling to approach $647 billion by the end of that period. While researchers and policy makers have been investigating the impact of this growth on the cost and riskiness of corporate loans and the potential implications for financial stability, less attention has been paid to the drivers of this phenomenon. In this post, which is based on our recent paper, we shed light on the role that insurance companies have played in the growth of corporate loans’ securitization and identify the key factors behind that role.

Insurance Economics

Working Paper 358 - The Colonial Origins of Banking Crisis in Africa

Could initial – colonial and early post-colonial – conditions explain episodes of systemic crisis in banking systems today? We exploit differences in ethnic concentration of initial ownership and management structure of Nigerian banks established during the colonial era to examine banking crisis and vulnerability of the financial system in contemporary Nigeria. Although banking institutions emerged from or were a reaction to British colonial banking structure, they pursued different practices with respect to ownership and management structure. To measure these initial conditions, we use historical data from the Nigerian banking system to construct an index of diversity in the initial own..

Insurance Economics

Climate Change and Consumer Finance: A Very Brief Literature Review

Extant research shows that climate change can impose significant costs on consumers’ wealth and finances. Both sea-level rise and flooding from hurricane events led to high price declines and thus wealth loss for homes in coastal areas or in disaster-struck areas, with effects lingering for a number of years in some cases. In terms of consumer finance, while the average consumer is not always significantly negatively affected by a disaster, the vulnerable groups (those with low credit scores and who are low income) can be severely affected, experiencing higher rates of delinquencies and bankruptcies in the aftermath. Banks help mitigate the negative effects in highly impacted areas by incr..

Insurance Economics

The Value of Vaccines in Maintaining Health System Capacity in England

The NHS is facing unprecedented health system pressure, with a record number of patients waiting for care, while their underlying condition is potentially worsening due to exceptionally long waits. When there is excess demand for health care, treating one patient means losing the opportunity to treat another. These opportunity costs demonstrate the need to consider health system capacity value, one of the so-called 'broader value elements' that is often not fully captured in traditional value assessments. Vaccinations against potentially severe diseases can prevent hospitalisations. For each hospital admission prevented, vaccination accrues direct savings to the health system by not having t..

Insurance Economics

Job Displacement, Unemployment Benefits and Domestic Violence

We estimate impacts of male job loss, female job loss, and male unemployment benefits on domestic violence in Brazil. We merge employer-employee and social welfare registers with administrative data on domestic violence cases brought to criminal courts, use of public shelters by victims, and mandatory notifications of domestic violence by health providers. Leveraging mass layoffs for identification, we first show that both male and female job loss, independently, lead to large and pervasive increases in domestic violence. Exploiting a regression discontinuity design, we then show that unemployment benefits do not reduce domestic violence while benefits are being paid, and that they lead to h..

Insurance Economics

Market Segmentation and Competition in Health Insurance

In the United States, households obtain health insurance through distinct market segments. We explore the economics of this segmentation by comparing coverage provided through small employers versus the individual marketplace. Using data from Oregon, we find households with group coverage spend 26% less on covered health care than households with individual coverage yet face higher markups. We develop a model of plan choice and health spending to estimate preferences in both markets and evaluate integration policies. In our setting, pooling can both mitigate adverse selection in the individual market and benefit small group households without raising taxpayer costs.

Insurance Economics

The Effect of Medicaid on Care and Outcomes for Chronic Conditions: Evidence from the Oregon Health Insurance Experiment

Health insurance may play an important role not only in immediate access to care but in the management of chronic disease, which would have implications for long-run care needs as well as health outcomes. Such causal connections are often difficult to establish, but we use Oregon’s 2008 Medicaid lottery to assess the management of diabetes and asthma, as well as several markers of physical health. This analysis complements several prior studies by introducing new data elements and by analyzing chronically ill subpopulations. While we had previously found that having insurance increases the diagnosis and use of medication for diabetes, we show here that it does not significantly increase th..

Insurance Economics

Effects of Opioid-Related Policies on Opioid Utilization, Nature of Medical Care, and Duration of Disability

We examine the effects of must-access prescription drug monitoring programs (PDMPs) and recent regulations limiting the duration of initial opioid prescriptions on care received by patients with work-related injuries, focusing on opioid utilization and medical care related to pain management. We find that must-access PDMPs contributed to declines in opioid utilization, while regulations limiting duration of initial opioid prescriptions had little effect on whether workers receive opioids, but reduced opioid use among those with prescriptions. We find limited evidence that must-access PDMPs affected utilization of other medical care related to pain management, and that must-access PDMPs and l..

Insurance Economics

Financial Incentives and Other Nudges Do Not Increase COVID-19 Vaccinations among the Vaccine Hesitant

Can financial incentives, public health messages and other behavioral nudges –approaches deployed by state and local governments, employers, and health systems – increase SARS-CoV-2 vaccination rates among the vaccine hesitant in the US? In mid-2021, we randomly assigned unvaccinated members of a Medicaid managed care health plan to $10 or $50 financial incentives, different public health messages, a simple appointment scheduler, or control to assess impacts on SARS-CoV-2 vaccination intentions and vaccine uptake within 30 days of intervention. While messages increased vaccination intentions, none of the treatments increased overall vaccination rates. Consistent with backlash concerns, f..

Insurance Economics

On the Persistence of the China Shock

Abstract We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding d..

Insurance Economics

Co-payment exemption and healthcare consumption. Quasi-experimental evidence from Italy

This paper investigates the causal effect of co-payment exemption on the utilization of healthcare services with a particular emphasis on the number of specialist visits in the Italian National Health System (NHS). As the co-payment exemption may be considered as a sort of insurance, a relevant research question is to ask whether such a protection has had any effect on healthcare services utilization. Exploiting a discontinuity in the multiple eligibility criteria for co-payment exemption, we apply Multiple Regression Discontinuity (MRD) in a quasi-experimental setting, considering both age and income requirements.This discontinuity also allows us to identify the effect of co-payment on a pa..

Insurance Economics

Big techs in finance: on the new nexus between data privacy and competition

The business model of big techs rests on enabling direct interactions among a large number of users on digital platforms, such as in e-commerce, search and social media. An essential by-product is their large stock of user data, which they use to offer a wide range of services and exploit natural network effects, generating further user activity. Increased user activity completes the circle, as it generates yet more data. Building on the self-reinforcing nature of the data- network-activities loop, some big techs have ventured into financial services, including payments, money management, insurance and lending. The entry of big techs into finance promises efficiency gains and greater financi..

Insurance Economics

A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

This paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance against pandemic income losses that people would like to have had. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implicati..

Insurance Economics

Georgia: Financial Sector Assessment Program-Technical Note-Financial Safety Net, Resolution and Crisis Management

Since the prior FSAP the authorities have comprehensively updated the legal, policy and procedural framework for failing bank resolution. In 2019 both the NBG and Banking Laws were amended to provide the authorities with powers to resolve banks that in the past might have been deemed too-big-to-fail; this eventuality is now greatly diminished. In 2017 a Deposit Insurance System Law was adopted to provide protection to natural person depositors when a bank fails and is liquidated. In 2020 the NBG published a series of rules specifying its policies and procedures for the use of its new powers, and jointly with the MoF published regulations addressing the use of temporary public funding to miti..

Insurance Economics

The Macroeconomic Effects of Universal Basic Income Programs

What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US design. I calibrate the model to the US economy and conduct counterfactual analyses that implement reforms ..

Insurance Economics