Evidence Of Moral Hazard Research Articles

Capital Regulation after the Crisis: Business as Usual?

The paper discusses the reform of capital regulation of banks in the wake of the financial crisis of 2007/2009. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, the paper calls for a thorough overhaul, moving away from risk calibration and raising capital requirements very substantially. The argument is based on the observation that the current system of risk-calibrated capital requirements, in particular under the model-based approach, played a key role in allowing banks to be undercapitalized prior to the crisis, with strong systemic effects for deleveraging multipliers and for the functioning of interbank markets. The argument is also based on the observation that the current system has no theoretical foundation, its objectives are ill-specified, and its effects have not been thought through, either for the individual bank or for the system as a whole. Objections to substantial increases in capital requirements rest on arguments that run counter to economic logic or are themselves evidence of moral hazard and a need for regulation.

Measuring moral hazard and adverse selection by propensity scoring in the mixed health care economy of Hong Kong

To evaluate the presence of moral hazard, adjusted for the propensity to have self-purchased insurance policies, employer-based medical benefits, and welfare-associated medical benefits in Hong Kong. Based on 2005 population survey, we used logistic regression and zero-truncated negative binomial/Poisson regressions to assess the presence of moral hazard by comparing inpatient and outpatient utilization between insured and uninsured individuals. We fitted each enabling factor specific to the type of service covered, and adjusted for predisposing socioeconomic and demographic factors. We used a propensity score approach to account for potential adverse selection. Employment-based benefits coverage was associated with increased access and intensity of use for both inpatient and outpatient care, except for public hospital use. Similarly, welfare-based coverage had comparable effect sizes as employment-based schemes, except for the total number of public ambulatory episodes. Self-purchased insurance facilitated access but did not apparently induce greater demand of services among ever users. Nevertheless, there was no evidence of moral hazard in public hospital use. Our findings suggest that employment-based benefits coverage lead to the greatest degree of moral hazard in Hong Kong. Future studies should focus on confirming these observational findings using a randomized design.

An Empirical Analysis of the Effects of Increasing Deductibles on Moral Hazard

AbstractUsing information on timing and number of claims in a unique data set pertaining to comprehensive automobile insurance with the increasing deductible provision in Taiwan, the authors provide new evidence for moral hazard. Time‐varying correlations between the choice of the insurance coverage and claim occurrence are significantly positive and exhibit a smirk pattern across policy months. This empirical finding supports the existence of asymmetric information. A subsample estimation depicts insured drivers' significant responses to increasing deductibles, which implies the existence of moral hazard. According to the probit regression results, the increasing deductible makes policyholders who have ever filed claims less likely to file additional claims later in the policy year. The empirical findings strongly support the notion that the increasing deductible provision helps control moral hazard.

An assessment of the effects of increased regulatory enforcement and legislative reform on occupational hearing loss workers' compensation claims: Oregon 1984–1998

Hearing loss from occupational exposures is a serious and widespread problem. This study measured the outcomes that increased enforcement of regulations and legislative interventions had on hearing loss workers' compensation claims. Workers' compensation claim data from Oregon was analyzed for the period of 1984-1998 to examine trends and severity of hearing loss claims. In 1987 and 1990, Oregon enacted legislative reforms to improve enforcement and promulgation of safety standards in the state. This study examined hearing loss claims between the periods of pre- and post-legislative reforms. It was found that hearing loss claims decreased significantly following the legislative reforms, although the average cost per claim increased. Age and tenure effects, and evidence of moral hazard were also discovered. Increased enforcement of regulations and legislative interventions by Oregon improved working conditions leading to occupational hearing loss. Nevertheless, hearing loss remains problematic, and continued efforts are required to improve worker safety.

The Final Instance - Unemployment Insurance Going Private? A Study of a Future Social Security Scenario in the UK and Germany

This paper explores the scope for privatizing unemployment insurance in Britain and Germany. The research builds on two consecutive projects, undertaken in the two countries between 1996 and 2000. The studies investigated people's attitudes towards the welfare state and private insurance, and families' strategies to manage the financial risk of unemployment. About 6% of the working population of both Britain and Germany claimed to possess private unemployment insurance. A further 23% in Britain and 12% in Germany expressed an intention to acquire private unemployment insurance. Attitudes towards private unemployment insurance were influenced by perceptions of unemployment risk, household circumstances, private money management strategies, and perceptions of the welfare state and the efficiency and trustworthiness of its institutions. The risk of exclusion from insurance in the two countries, either voluntary or as a result of actuarial risk assessment, is investigated. There is at present little evidence of adverse selection, nor would an expansion of the private unemployment insurance market necessarily entail that risk. However, the study found some, albeit limited, evidence of moral hazard. Significant country-specific differences were apparent in all aspects of the study.

Initial Selection and Cause of Disability for Individual Permanent Health Insurance

AbstractWe investigate the influence of initial selection (the impact of underwriting during the early years of a policy's life) on individual Permanent Health Insurance claim inceptions. In Gutiérrez-Delgado (1999) a decreasing trend was found. In this paper we include the effect of cause of disability and fit a generalized linear model in order to gain a greater understanding of the phenomenon. Both effects, policy duration and cause of disability, are found to have a significant effect on the number of claims. We describe their influence using factors that collect the information available through the fitted model. Results from both factors suggest that the grouping of diseases selected for the research helps to explain partially our earlier results. In addition there is some evidence of moral hazard in mental disorders and musculoskeletal diseases which also contributes to the understanding of the negative trend found.

Health Reform in the United States

Health care has figured prominently on the public agenda of the United States in recent years. In addition to the well publicized I993-4 health care reform effort, the failure of the President and the Congress to reach a budget agreement in January I996 was partly attributable to differences with respect to the Medicare and Medicaid programmes. In this paper I first describe some key facts about the American health care sector and then appraise recent trends. The health care sector is prominent not only on the public agenda but also in the economy. In I994 Americans spent $949 billion, or I3'7% percent of GDP, on health care, values that exceed those of any other developed country.' Moreover, the sector has been growing fairly steadily at approximately 4 % per year per person in real terms for over 50 years (Table I). The uptick in the I960s was most likely attributable to the implementation of the Medicare and Medicaid legislation in I966. In popular discussions this factor-of-ten real cost growth over half a century is often seen as abuse and blamed on some combination of physicians exploiting fee-for-service reimbursement, as well as rents arising from largely passive third party insurance (i.e. excessive fees). At a theoretical level economists would presume that, apart from time, pain and other non-pecuniary costs, fully or nearly fully insured consumers will demand health services until the marginal product is near zero. Furthermore, fees paid by insurers (private or public) are likely to be above marginal cost, because fees below marginal cost would not elicit production and the traditional insurance coverage, as explained below, provides little basis for price competition. Thus, fees could contain rents, but in any event will be sufficiently high that physicians will be willing to satisfy consumer demands. Furthermore, if consumers are not fully insured, any rents might tempt physicians to induce additional demand.2 In fact, evidence of moral hazard in American health care is reasonably strong. Fully insured consumers in a randomized experiment spent about 40 % more than those with a large deductible, but for the average person there was little or no measurable effect on health.3 The degree of cost sharing under traditional indemnity insurance, however, was less than the large deductible

Market Insurance, Self-Insurance, and Self-Protection

Market Insurance, Self-Insurance, and Self-Protection