The wealth effects of premium subsidies on moral hazard in insurance markets

Jaspersen, Johannes G.; Richter, Andreas

doi:10.1016/j.euroecorev.2015.03.007

Cited by 17 publications

(20 citation statements)

References 21 publications

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“…Government subsidization of insurance is commonplace in many insurance markets, including health, flood, terrorism, deposit, agriculture, among others (Brown, Kroszner, and Jenn, ; Brown et al, ; Ziebarth, ; Michel‐Kerjan and Kunreuther, 2011; Woodard et al, ; Aron‐Dine, Einav, and Finkelstein, ; Dickstein et al, ; Jaspersen and Richter, ), and comes in both supply‐ and‐demand enhancing forms including explicit premium subsidies, mandatory coverage, and favorable government reinsurance. The analysis of consumer responses to subsidization is central to evaluating, budgeting, and designing these programs.…”

Section: Introductionmentioning

confidence: 99%

Estimation of Insurance Deductible Demand Under Endogenous Premium Rates

Woodard¹,

Yi²

2018

J of Risk & Insurance

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Government-subsidized insurance is ubiquitous, yet estimation of demand in such markets remains challenging. The premium charged for a given deductible is determined by actuarial construction; thus, observed choicepairs are endogenous leading to biased estimation under standard econometric approaches. A theoretical model and simulation study are developed, and a new identification strategy proposed. An empirical application using Federal Crop Insurance Program-a $100 billion/year program-data reveals that demand is quite elastic after accounting for this endogeneity. Mistreatment of such endogeneity is likely partly responsible for pervasive faulty findings of inelastic insurance demand in related applications. Policy implications are also discussed.

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Section: Introductionmentioning

confidence: 99%

Estimation of Insurance Deductible Demand Under Endogenous Premium Rates

Woodard¹,

Yi²

2018

J of Risk & Insurance

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“…In foreign terminology, "variable costs" are referred to as transaction costs; they affect not only the offer price but also the size of the insurance premium. In (Ramsay and Oguledo 2012) and many other works (Bokšová 2015;Jaspersen and Richter 2015), it is noted that variable costs are almost proportional to the volume of contracts. This hypothesis will be further developed.…”

Section: Rubmentioning

confidence: 99%

Insurance Risks Management Methodology

Ivanovna

Vladimirovna

Тургаева

2018

JRFM

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The purposes of the study are to substantiate the influence of the specific features of insurance on the set of management accounting objects and to develop a mechanism of preparing the relevant information for insurance risk management. Management accounting allows generating reports, specially prepared for managers of various levels of control (in contrast to financial accounting, which considers information on the basis of general accounting rules). This allows realizing the main goal of management accounting; that is, providing information support for management decisions aimed at maximizing the organization’s profits. The object of research is management accounting in the information system of an insurance company. The stages in the execution of accounting procedures in a management accounting system are defined in the form of a diagram, the features of insurance affecting the organization of management accounting are classified, and an intracompany ledger of the connection between the segments of activity and responsibility centers is developed for insurance companies.

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“…Insurance is widely used in agriculture to protect farmers against crop losses. Due to ethical problems such as adverse selection (i.e., due to information asymmetry) in traditional agricultural insurance [20], recent research has mainly focused on weather index insurance [21,22]. However, insurance is mostly used for catastrophic events, whereas derivatives provide a more flexible risk management tool for non-catastrophic weather risks [23,24].…”

Section: Literature Reviewmentioning

confidence: 99%

An Actuarial Pricing Method for Air Quality Index Options

Liu

Zhao

Wang

et al. 2019

IJERPH

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Poor air quality has a negative impact on social life and economic production activities. Using financial derivatives to hedge risks is one of the important methods. Air quality index (AQI) options are designed to help enterprises cope with the operational risk caused by air pollution. First, the expanded Ornstein–Uhlenbeck model is established using an autoregressive-generalized autoregressive conditional heteroscedasticity (AR-GARCH) method to predict AQI for a city. Next, the average AQI is constructed to be as the underlying index for the AQI options. We then priced AQI options using an actuarial method with an Esscher transform. Meanwhile payoff functions for the options are established to let enterprises hedge against the operational risk caused by air pollution. Finally, we determined the price of AQI options using data from Xi’an, China, and the example of a tourism enterprise as a case study of how AQI options can be applied to hedge against operational risk for enterprises. With AQI options trading, enterprises can hedge against operational risks caused by air pollution. The applicability of AQI options is wide, it can also be applied in other cities or regions.

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The wealth effects of premium subsidies on moral hazard in insurance markets

Cited by 17 publications

References 21 publications

Estimation of Insurance Deductible Demand Under Endogenous Premium Rates

Estimation of Insurance Deductible Demand Under Endogenous Premium Rates

Insurance Risks Management Methodology

An Actuarial Pricing Method for Air Quality Index Options

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