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.
Autor, David, Mark Duggan, and Jonathan Gruber.
"Moral Hazard and Claims Deterrence in Private Disability Insurance."
American Economic Journal: Applied Economics,
Asymmetric and Private Information; Mechanism Design
Insurance; Insurance Companies; Actuarial Studies
Safety; Job Satisfaction; Related Public Policy
Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions