Journal of Risk and Insurance最新文献

Several states have recently implemented driver license reforms that give unauthorized immigrants access to driver licenses, aiming to reduce uninsured driving and lower premium costs. We test this expectation in the context of California's Assembly Bill 60 (AB60). AB60 gives about 2.6 million unauthorized immigrants access to driver licenses, making it the largest policy of its kind. Exploiting cross-county variation in the estimated number of AB60 licenses, we find no measurable effects on auto insurance uptake or premium costs. A power analysis and multiple robustness checks corroborate this conclusion. We interpret our results to suggest that most newly licensed unauthorized immigrants were already driving before the reform to access work and basic services. Furthermore, unauthorized drivers may already have had access to an insured vehicle. Our research revisits prominent claims about the effects of driver license reforms and provides much-needed empirical evidence to a controversial policy debate.

This paper provides novel evidence of the moral hazard problem in environmental insurance by investigating the effect of environmental liability insurance (ELI) on firms' environmental performance. Using the staggered adoption of ELI policies in China as a quasi-natural experiment, we employ a difference-in-differences setup based on a comprehensive firm-level data set. We find that the adoption of ELI policies significantly reduces firms' efforts in treating water pollution. The negative estimate indicates a moral hazard problem and is the opposite of the positive estimates found mainly in studies that focus on US firms. We further find that the negative effect is lessened for firms in strictly supervised regions and for firms with strong environmental awareness. This paper is one of the first to evaluate environmental insurance in developing economies and provides novel evidence on moral hazard in environmental liability insurance markets.

Aging societies need efficient and flexible systems to finance care for the frail elderly. We study pre-retirees' demand for flexible insurance that can finance informal long-term care by paying income in poor health states instead of reimbursing formal care costs. We collect and analyze stated preferences for this long-term care income product, and preferences for informal care. When asked to allocate wealth to a life annuity, a liquid investment and flexible long-term care insurance, around 75% of our sample of 1008 pre-retirees choose some long-term care cover. Study participants treat long-term care income insurance as a complement to informal care from their families. Females who expect to rely exclusively on extensive care from family members prefer more cover than similar males. We also find that if long-term care income insurance were available, some healthier seniors would purchase additional longevity insurance, using liquid funds otherwise set aside to self-insure long-term care risk.

I formulate expected-utility-maximizing models for health insurance with a single optimal coinsurance (C*) and (separately) a single optimal deductible (D*). While so-doing, I formalize Nyman's challenge to standard welfare-loss models, clarifying when and by how much this alters unadjusted models. Using MEPS-calibrated lognormal distributions and incorporating skewness and kurtosis measures of financial risk, I show how C* shifts as various economic parameters change. For reasonable parameter values, C* < 0.1, much lower than variance-only estimates would conclude. Omitting higher-order risk parameters importantly understates risk and hence understates optimal insurance coverage. I separately develop methods to determine D*, showing that it is approximately a fixed percentage of income that falls as the distribution of financial risks rise. This finding contrasts with existing US public policy regarding high-deductible health plans, which employ fixed deductibles, independent of income.

This paper examines the impacts of the Affordable Care Act (ACA)'s Medicaid expansion and tort reforms on the medical liability system. Medicaid expansion increased the demand for medical services, but in doing so it may also increase physicians' medical liability. By studying malpractice costs to insurers, medical practitioners, and hospitals in the United States in 2010–2018, we find insurers in Medicaid expansion states experienced higher medical liability costs than those in nonexpansion states. Medical practitioners paid higher premiums in expansion states but the premium increase was not enough to fully offset rising costs. In addition, we do not find that tort reforms mitigated ACA-induced malpractice liability costs. We show this is because Medicaid expansion increased malpractice costs mainly by increasing claim frequency while tort reforms generally reduce claim severity. We also find little evidence that hospitals paid higher malpractice insurance premiums to insurers or self-insurance programs, or incurred higher out-of-pocket medical liability losses after Medicaid expansion.

Vehicle crash tests mitigate an informational market failure and provide substantial benefits to consumers. Consumers cannot accurately assess vehicle safety leading automakers to provide it suboptimally. Crash tests performed by the Insurance Institute for Highway Safety represent an attempt to mitigate this market failure. This paper presents evidence that automakers responded by producing safer vehicles and that consumers increased purchases of highly rated vehicles. A novel identification strategy using the year of vehicle redesign is used to evaluate the tests' safety impact. A lower-bound estimate of program benefits is $3000 per vehicle resulting in an annual reduction of 1650 fatalities.

This paper examines the long-term evolution of the linkages of the insurance sector with financial and nonfinancial 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 nonfinancial firms are structurally different but as high as those of the largest banks.

Risk equalization schemes, which transfer money to/from insurers that have above/below average risks, are a fundamental tool in regulated health insurance markets in many countries. Risk sharing (the transfer of some responsibility for costs from a plan to the regulator or the overall insurance market), are an additional method of insulating insurers who attract higher-than-average risks. This paper proposes, implements and quantifies incorporating risk sharing within a risk equalization scheme that can be applied in a data-poor context. Using Chile's private health insurance market as case study, we show that modest amount of risk sharing greatly improves fit even in simple demographic-based risk equalization. Expanding the model's formula to include morbidity-based adjustors and risk sharing redirects compensations at insurer level and reduces opportunity to engage in profitable risk selection at the group level. Our emphasis on feasibility may make alternatives proposed attractive to countries facing data-availability constraints.