Moral Hazard and Claims Deterrence in Private Disability Insurance
- (pp. 110-41)
Abstract
Exploiting within-firm, over-time variation in plan parameters for nearly 10,000 Long Term Disability (LTD) policies held by US employers, we present the first empirical analysis of the determinants of private LTD spells. We find that a shorter waiting period and a higher replacement rate increase the incidence of LTD spells. Sixty percent of the latter effect is due to the mechanical censoring of shorter spells, with the remainder due to the deterrence of spells that would have continued beyond the waiting period. Deterrence is driven primarily by a reduction in the incidence of shorter duration spells and less severe disabilities.Citation
Autor, David, Mark Duggan, and Jonathan Gruber. 2014. "Moral Hazard and Claims Deterrence in Private Disability Insurance." American Economic Journal: Applied Economics, 6 (4): 110-41. DOI: 10.1257/app.6.4.110Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G22 Insurance; Insurance Companies; Actuarial Studies
- J28 Safety; Job Satisfaction; Related Public Policy
- J32 Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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