Insurance Value Research Articles

The Value of Health Insurance and Labor Supply: Evidence from the Affordable Care Act Dependent Coverage Mandate

This paper examines how the value of health insurance affects labor supply, exploiting a quasi-experimental change in health insurance provision - i.e., the Affordable Care Act (ACA) dependent coverage mandate implemented in 2010. Using difference-in-differences, regression discontinuity, and regression kink designs, I find no evidence of the labor market impact of the ACA dependent coverage mandate despite its substantial impact on insurance coverage for young adults. I also show that the aging-out-at-26 condition in eligibility leads to low valuation of insurance and in turn no change in the labor supply of young adults.

Insurance Value of Green Infrastructure in and Around Cities

The combination of climate change and urbanization projected to occur until 2050 poses new challenges for land-use planning, not least in terms of reducing urban vulnerability to hazards from projected increases in the frequency and intensity of climate extremes. Interest in investments in green infrastructure (interconnected systems of parks, wetlands, gardens and other green spaces), as well as in restoration of urban ecosystems as part of such adaptation strategies, is growing worldwide. Previous research has highlighted the insurance value of ecosystems in securing the supply of ecosystem services in the face of disturbance and change, yet this literature neglects urban areas even though urban populations are often highly vulnerable. We revisit the insurance value literature to examine the applicability of the concept in urban contexts, illustrating it with two case studies: watersheds providing drinking water for residents of Vancouver, Canada; and private gardens ensuring connectedness between other parts of urban green infrastructure in London, UK. Our research supports the notion that investments in green infrastructure can enhance insurance value, reducing vulnerability and the costs of adaptation to climate change and other environmental change. Although we recommend that urban authorities consider the insurance value of ecosystems in their decision-making matrix, we advise caution in relying upon monetary evaluations of insurance value. We conclude by identifying actions and management strategies oriented to maintain or enhance the insurance value of urban ecosystems. Ecosystems that are themselves resilient to external disturbances are better able to provide insurance for broader social–ecological systems.

Toward a Mutualization of European Unemployment Insurance? On Limiting the Downsides of a Fiscal Transfer System for the Eurozone

There is a large, yet growing debate about the need to complement the European monetary union with a stronger fiscal union. This article reviews the potential trade-offs between effectiveness, moral hazard problems, and permanent redistribution. Addressing the counter-arguments against a tighter fiscal union is essential to overcome the political reluctance in some member states that are concerned about large amounts of redistribution. We discuss clawback mechanisms that have been suggested in the literature as a measure to limit redistribution, but conclude that clawbacks are undesirable, as they would essentially destroy the insurance value of a fiscal union. Instead, we propose that a clearly defined exit option as a guarantee against involuntary redistribution can make entry into a stronger fiscal union less risky and hence more attractive for member states.

Zone(침수심)별 보험가입목적물의 손해액과 보험가액을 이용한 보험요율 산정방안: 대재해 모델링 방법을 중심으로

Zone(침수심)별 보험가입목적물의 손해액과 보험가액을 이용한 보험요율 산정방안: 대재해 모델링 방법을 중심으로

The Unaccounted Insurance Value of Medical Innovation

Traditional value of medical innovation models estimate the benefits of a new treatment to individuals who fall sick ex-post. However, economic theory suggests medical innovation has additional benefits ex-ante - before susceptible individuals know whether or not they will fall sick. This paper presents a model for estimating the ex-ante value of new medical innovation, where risk-averse individuals who are susceptible to contracting a disease in the future derive value from the existence of a treatment, because risk-averse individuals prefer to insure against uncertainty in future survival outcomes. A healthy, risk-averse individual should value a new treatment for a disease and be willing to pay a small premium for it, even if he never uses it because of his future risk of the disease. I demonstrate that when individuals are risk-averse, the total ex-ante value is always greater than the total ex-post value. The difference between ex-ante and ex-post value is the insurance value of medical innovation due to risk aversion. I show that insurance value is highest for rare diseases, where afflicted patient populations are small, but vulnerable patient populations are large. For very rare diseases, up to 64 percent of the value of a cure is ex-ante insurance value. Using population-level estimates of disease risk for cancer, I find that between 24 and 63 percent of the value of cancer-specific cures are comprised of ex-ante insurance value - estimates vary by the prevalence and mortality risk of each cancer type. These results suggest there will be under-provision of valuable innovation by the private biopharmaceutical market if only ex-post valuations are reimbursed by payers.

Collision, Illinois: David Foster Wallace and the Value of Insurance

This article argues that David Foster Wallace, across his career, was subtly invested in the possibilities for defining community value in varied structures of insurance, from the New Deal’s transformation of the welfare state to the neoliberal economics of for-profit health insurance. Historicizing Wallace and deciphering the overlooked ways in which he deploys economics, the article focuses on readings of “Westward the Course of Empire Takes Its Way” (1989), “The Soul Is Not a Smithy” (2004), and “Oblivion” (2004), while also linking the latter two to the development of The Pale King (2011).

Adaptive conjoint analysis for the vitalisation of angel investments by entrepreneurs

ABSTRACTIn order to promote angel investments, attracting those who have entrepreneurial experience is necessary because their capital, unique managing experience, and business insight are highly beneficial to the performance of the investment. This can be accomplished by providing a preferred investment environment for potential angels who have entrepreneurial backgrounds. In this paper, we use an adaptive conjoint analysis to identify preferred investment environments represented as a combination of support policies for business angels who have entrepreneurial experience in Korea. Of particular interest is a preference for angel insurance. This insurance is newly proposed based on prospect theory, which explains that people tend to be more sensitive to a loss than to a gain. The value of the angel insurance is compared to those of tax policies and matching funds for business angels. The empirical results are expected to contribute to promoting angel investments by attracting entrepreneurs to become business angels.

Health and economic benefits of public financing of epilepsy treatment in India: An agent-based simulation model.

SummaryObjectiveAn estimated 6–10 million people in India live with active epilepsy, and less than half are treated. We analyze the health and economic benefits of three scenarios of publicly financed national epilepsy programs that provide: (1) first‐line antiepilepsy drugs (AEDs), (2) first‐ and second‐line AEDs, and (3) first‐ and second‐line AEDs and surgery.MethodsWe model the prevalence and distribution of epilepsy in India using IndiaSim, an agent‐based, simulation model of the Indian population. Agents in the model are disease‐free or in one of three disease states: untreated with seizures, treated with seizures, and treated without seizures. Outcome measures include the proportion of the population that has epilepsy and is untreated, disability‐adjusted life years (DALYs) averted, and cost per DALY averted. Economic benefit measures estimated include out‐of‐pocket (OOP) expenditure averted and money‐metric value of insurance.ResultsAll three scenarios represent a cost‐effective use of resources and would avert 800,000–1 million DALYs per year in India relative to the current scenario. However, especially in poor regions and populations, scenario 1 (which publicly finances only first‐line therapy) does not decrease the OOP expenditure or provide financial risk protection if we include care‐seeking costs. The OOP expenditure averted increases from scenarios 1 through 3, and the money‐metric value of insurance follows a similar trend between scenarios and typically decreases with wealth. In the first 10 years of scenarios 2 and 3, households avert on average over US$80 million per year in medical expenditure.SignificanceExpanding and publicly financing epilepsy treatment in India averts substantial disease burden. A universal public finance policy that covers only first‐line AEDs may not provide significant financial risk protection. Covering costs for both first‐ and second‐line therapy and other medical costs alleviates the financial burden from epilepsy and is cost‐effective across wealth quintiles and in all Indian states.

The Value of Social Security: Are Formal Jobs Better?

As the population ages, low and unequal social security coverage are among the most pressing challenges in the Latin American region. On average, only 45% of workers contribute to social security, and this figure is much lower for low-income and low-skilled individuals. There are many hypotheses for this limited and uneven coverage.This paper studies two of them: First, we test whether individuals do not contribute to social insurance because, due to myopia or limited information, they place little value in social insurance. Second, we test whether low-income, low-skilled individuals have a lower value of social insurance than higher-income or higher-skilled individuals. Using an indirect method to estimate individual social security valuation based on self-reported job satisfaction, we find that workers attain higher job satisfaction in formal than in informal jobs in Peru but not in the case of Mexico. In addition, we find little evidence that the value of social insurance increases with income or education. If anything, the opposite is the case, with lower-income or lower-education individuals deriving higher utility from having access to social insurance.

The Optimal Timing of Unemployment Benefits: Theory and Evidence from Sweden

This paper provides a simple, yet robust framework to evaluate the time profile of benefits paid during an unemployment spell. We derive sufficient-statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell. Our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare-improving changes in the benefit profile that account for all relevant arguments jointly. For the empirical implementation, we use administrative data on unemployment, linked to data on consumption, income, and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that, if anything, the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. In trading off insurance and incentives, our analysis suggests that the flat benefit profile in Sweden has been too generous overall. However, both from the insurance and the incentives side, we find no evidence to support the introduction of a declining tilt in the profile. (JEL D82, E21, E24, J64, J65)

Zone(침수심)별 보험가입목적물의 보험가액과 손해액을 이용한 보험요율산정 방안

Generally, the rate making is made by the fundamental principle that it should be fairly differentiated in accordance with risk magnitude of insured objects. But the natural insurance is currently rated by city, country and district, which are recognized as rating units and it does not provide any reasonable discriminatory based on risk magnitude. Therefore, only those who possess the high-risked objects of insurance are strongly likely to be insured and it may also cause the problem of adverse-selection. To solve this problem, the single rate of current city, county and district is specified by six zones, depending on the size of inundation depth, as the homogeneous risk. It then suggests another way of calculating the rate making by using insurable value and loss cost of the zonal object of insurance. Then this study applied this method into calculating the zonal rates of Buk-Gu of Ulsan metropolitan city, and so on. Through making a comparison single rate with zonal rate, we confirmed the actual applicability of using this study.

Penilaian Kawasan Hutan dalam Penentuan Kelayakan Luas Areal Perkebunan Kelapa Sawit (Suatu Pendekatan Konseptual)

Most studies valuation that have been described previously including forest ecosystems do not see the forest ecosystem services as natual capital / natural assets and even the socio-ecological context. The implication is that forest ecosystem services are considered as an economic asset / economic capital. the concept of value used in the valuation is the concept of the value of output. Though the forest ecosystem services has the characteristics of a sustainable dynamic and as part of the life supporting system including the ability resilience and self-terrific capacity. So that the forest ecosystem is no longer seen as economic assets, but with the characteristics of the dynamic and sustainable forest ecosystem is seen as natural or natural capital assets. The current perspective marginalize other forest ecosystem functions, such as socio-economic functions. Whereas the concept of an insurance value of forest ecosystems is not just the case as seen from the perspective as natural capital, but the role of social values in maintaining the sustainability of forest ecosystems is crucial, as reflected by the presence of heritage value, and existence value. So that the insurance value of the forest ecosystem occurs because the forest ecosystem serves as a natural asset / natural and social capital assets / social capital.

Cash-on-Hand in Developing Countries and the Value of Social Insurance: Evidence from Brazil

This paper first exploits a "bonus" policy providing low-income workers with cash grants in Brazil to study the effect of liquidity provision on unemployment outcomes. Based on a RD Design, I find that granting unemployed workers with a bonus equal to half of their previous monthly earnings decreases the probability of exiting unemployment within 8 weeks by around 0.65%. Second, by exploiting the UI potential duration schedule, I find that granting workers with an extra month of unemployment benefits decreases the same outcome by 1.9%. Then, theoretical results from Landais (2014) are used to combine these estimates and disentangle liquidity and moral hazard effects of UI. Based on these, I estimate the liquidity-to-moral hazard ratio in Brazil to be as large as 98%, similarly to values previously found in the US. It suggests that, contrary to common belief, providing UI in developing countries with large informal labor markets may yield substantial welfare gains.

Health and economic benefits of scaling up a home-based neonatal care package in rural India: a modelling analysis.

Approximately 900 000 newborn children die every year in India, accounting for 28% of neonatal deaths globally. In 2011, India introduced a home-based newborn care (HBNC) package to be delivered by community health workers across rural areas. We estimate the disease and economic burden that could be averted by scaling up the HBNC in rural India using IndiaSim, an agent-based simulation model, to examine two interventions. In the first intervention, the existing community health worker network begins providing HBNC for rural households without access to home- or facility-based newborn care, as introduced by India's recent programme. In the second intervention, we consider increased coverage of HBNC across India so that total coverage of neonatal care (HBNC or otherwise) in the rural areas of each state reaches at least 90%. We find that compared with a baseline of no coverage, providing the care package through the existing network of community health workers could avert 48 [95% uncertainty range (UR) 34-63] incident cases of severe neonatal morbidity and 5 (95% UR 4-7) related deaths, save $4411 (95% UR $3088-$5735) in out-of-pocket treatment costs, and provide $285 (95% UR $200-$371) in value of insurance per 1000 live births in rural India. Increasing the coverage of HBNC to 90% will avert an additional 9 (95% UR 7-12) incident cases, 1 death (95% UR 0.72-1.33), and $613 (95% UR $430-$797) in out-of-pocket expenditures, and provide $55 (95% UR $39-$72) in incremental value of insurance per 1000 live births. Intervention benefits are greater for lower socioeconomic groups and in the poorer states of Chhattisgarh, Uttarakhand, Bihar, Assam and Uttar Pradesh.

Estimating The Maximum Value of Crop Hail Insurance Under Stochastic Yield and Price Risk

ABSTRACTThe objective of this article is to estimate the maximum value of crop hail insurance according to the financial extent of hail risk's impact on the enterprise in two regions, North West (low hail risk area) and Mpumalanga (high hail risk area). The difference in the cumulative probability distributions of the Net Present Value (NPV) of the margin after interest and tax in the event of hail and in the event of no hail will provide a graphic indication of the financial impact of hail. To determine if the decision maker is willing to pay in order to remove the impact of hail on the enterprise, the utility weighted risk premium (UWRP) must be calculated with the use of stochastic efficiency with respect to a function (SERF) analysis. The calculated maximum benefit (or UWRP) that the decision maker will receive through the elimination of hail will set the upper limit for the cost of crop hail insurance. The results indicate that hail does have a negative impact on the financial position of the farms in North West and Mpumalanga. The effect of hail risk in Mpumalanga is, however, more severe. The calculated maximum benefit (UWRP) from the elimination of hail damage in two regions is R83.50/hectare in North West and R708.70/hectare in Mpumalanga. The conclusion can thus be made that decision makers in both regions will be willing to pay for crop hail insurance, but much more so in Mpumalanga than in North West.

On the value of soil biodiversity and ecosystem services

This paper provides a framework to understand the source of the economic value of soil biodiversity and soil ecosystem services and maps out the pathways of such values. We clarify the link between components of the economic value of soil biodiversity and their associated services of particular relevance to soils. We contend that soil biodiversity and associated ecosystem services give rise to two main additive value components in the context of risk and uncertainty: an output value and an insurance value. These are illustrated with examples from soil ecology and a simple heuristic model. The paper also points towards the challenges of capturing such values highlighting the differences between private (individual) and public (global) sources of value.

Damage to residential buildings in Hveragerði during the 2008 Ölfus Earthquake: simulated and surveyed results

This study analyses the performance of residential buildings in the town of Hveragerði in South Iceland during the 29 May 2008 Mw 6.3 Olfus Earthquake. The earthquake occurred very close to the town, approximately 3–4 km from it. Ground shaking caused by the earthquake was recorded by a dense strong-motion array in the town. The array provided high-quality three-component ground acceleration data which is used to quantify a hazard scenario. In addition, surveys conducted in the town in the aftermath of the earthquake have provided information on macroseismic intensity at various locations in the town. Detailed information regarding the building stock in the town is collected, and their seismic vulnerability models are created by using building damage data obtained from the June 2000 South Iceland earthquakes. Damage to buildings are then simulated by using the scenario hazard and vulnerability models. Damage estimates were also obtained by conducting a survey. Simulated damage based on the scenario macroseismic intensity is found to be similar to damage estimated from survey data. The buildings performed very well during the earthquake—damage suffered was only 5 % of the insured value on the average. Correlation between actual damage and recorded ground-motion parameters is found to be statistically insignificant. No significant correlation of damage was observed, even with macroseismic intensity. Whereas significant correlation was observed between peak ground velocity and macroseismic intensity, neither of them appear to be good indicators of damage to buildings in the study area. This lack of correlation is partly due to good seismic capacity of buildings and partly due to the ordinal nature of macroseismic intensity scale. Consistent with experience from many past earthquakes, the survey results indicate that seismic risk in South Iceland is not so much due to collapse of buildings but rather due to damage to non-structural components and building contents.

Mental Accounting, Access Motives, and Overinsurance

I explore the potential of an alternative insurance motive, the access motive, to better understand attitudes toward modest-risk insurance. I derive the value of partial insurance based on the access motive and show how it critically depends on the way in which the insurer pays benefits. I argue that people's tendency to perform mental accounting makes the access motive relevant for understanding the popularity of insurance against modest risks such as warranties and the avoidance of deductibles. It helps to explain several empirical regularities that are difficult to reconcile within existing models.

The Firm-Value Risk Model

The Firm-Value Risk Model combines the technology of actuarial optimal dividends models with insights regarding financial frictions from financial economics, especially as they apply to risk transfer in (re)insurance firms. This paper illustrates, by numerical solution of a set of case studies, how certain stylized facts about (re)insurer value emerge naturally from the Firm-Value Risk Model, specifically: (1) the concave relationship between firm value and financial slack (2) the convex relationship between firm value and risk, (3) the substitution of external capital for reinsurance, and (4) the irrelevance of risk management when external capital is freely available, even in the presence of customer risk aversion.

Current State and Factors of Kazakhstan Compulsory Retail Insurance Potential Formation

The article focuses on the high priority of the insurance market development as an integral element of the market infrastructure of the Kazakhstan economy within the framework of determining the economic value of compulsory retail insurance. The economic content, tasks, and basic principles of the market of compulsory retail insurance in Kazakhstan were outlined. The position of compulsory retail insurance in the insurance market of the state was identified. The main type of compulsory retail insurance in the Republic of Kazakhstan, that is insurance of civil and legal liability of vehicle owners, was described and analysed. Basic tendencies of the market of compulsory retail insurance in Kazakhstan were identified. These include stable development with reduced economic efficiency due to the tendencies of companies to reduce insurance premiums when insuring civil and legal liability of vehicle owners. Specific features of the development of the compulsory retail insurance market of the Republic of Kazakhstan were determined. These are revealed in the regional and functional market concentration leading to its reduced competitive power and quality of insurance services. Using a principle component analysis (factor analysis), the level of impact of the social and economic state of the Republic of Kazakhstan and development trends of the world economy’s financial and economic sectors on the development of the Kazakhstan market of compulsory retail insurance was identified. A complex of measures was outlined to enhance the efficiency of the compulsory retail insurance market in Kazakhstan. In addition, it creates sources for building its financial potential in order to maintain the forecasted positive tendency of increasing the market efficiency for 2015 based on the major factor loadings of social and economic state of the Republic of Kazakhstan as well as development trends of the world economy’s financial and economic sectors.