Insurance Economics
Paper Session
Sunday, Jan. 5, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Martin Boyer, HEC Montréal
Fungibility in Workplace Benefits Choices: Evidence from Health Savings Accounts
Abstract
Workplace benefits now comprise roughly one-third of total employee compensation. The choice of benefits has grown increasingly complex, particularly in health insurance with the spread of Health Savings Accounts (HSAs). Using a novel survey at 15 universities linked with administrative data on retirement savings, we examine employee decision-making related to HSAs. We find that employees do not use HSAs as long-term savings and they heavily discount employer HSA deposits relative to cash. Employees offset higher HSA contributions from their employer with lower contributions themselves, and most employees do not know how or whether their HSA funds are invested. While employees with financial literacy and liquidity are more likely to treat their HSA as savings, most of this group still use HSAs to finance current health expenses. We also find strong evidence that employees prefer lower premiums to higher HSA assets, rejecting fungibility between cash and HSA assets. We discuss implications for the design of workplace benefits and financial education programs.Re-examining Moral Hazard under Inattention: New Evidence from Behavioral Data in Auto Insurance
Abstract
This paper uses novel sensor data to study drivers’ risky phone use behavior. The results challenge the conventional wisdom of moral hazard in insurance. We first identify handheld phone use behavior (“HPU”) and quantify its causal impact on accident likelihood (“riskiness”) using exhaustive fixed-effect models. We then find HPU to be risky but insensitive to both insurance coverage changes and weather shocks that increase its riskiness. This contradicts the prevailing theoretical prediction and empirical studies that have thus far relied on claims data alone. On the other hand, an experiment with a one-time text-message warning led to a persistent 15% HPU reduction. Drivers’ inattention to risk thus limits moral hazard.Claimant Fraud in Workers Compensation – How Firms Discipline Their Workers
Abstract
I study claimant fraud in workers compensation insurance and the measures perfectly experienced-rated or self-insured firms apply in order to reduce the impact of the same on profits. Firms determine the wage rate and demand labor in a market with oversupply, hired workers have the opportunity to fraudulently claim workers compensation benefits, and ex-post claims investigation may be applied if the savings outweigh the costs. In order to prevent claimant fraud, firms offer efficiency wages, which render fraud unattractive for workers, below some critical wage replacement rate and rely on claims investigation or labor provision of fully honest workers above the critical wage replacement rate. Above the critical wage replacement rate, claims investigation can be partially substituted by investment in injury prevention or firms entirely rely on labor provision of fully honest workers and combat fraud through investment in staff screening.JEL Classifications
- G2 - Financial Institutions and Services
- M5 - Personnel Economics