Long-Term Care Insurance: Information Frictions and Selection
American Economic Journal: Economic Policy
vol. 12,
no. 3, August 2020
(pp. 134-69)
Abstract
This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. Our results are twofold. First, information frictions are pervasive. Second, measuring the welfare losses associated with frictions in a framework that also allows for selection, it is found that information frictions reduce equilibrium take-up and lead to large welfare losses, while selection plays little role.Citation
Boyer, M. Martin, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud. 2020. "Long-Term Care Insurance: Information Frictions and Selection." American Economic Journal: Economic Policy, 12 (3): 134-69. DOI: 10.1257/pol.20180227Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G22 Insurance; Insurance Companies; Actuarial Studies
- I13 Health Insurance, Public and Private
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