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Heterogeneous selection in the market for private supplemental dental insurance: evidence from Germany

Author

Listed:
  • Jan Michael Bauer

    (Copenhagen Business School)

  • Jörg Schiller

    (University of Hohenheim)

  • Christopher Schreckenberger

    (University of Hohenheim)

Abstract

This paper analyzes the German market for supplemental dental insurance to identify selection behavior based on individuals’ private information. The rather limited underwriting by German private health insurers makes this market especially prone to selection effects. Although the standard positive correlation test does not indicate asymmetric information in this market, we conjecture that this outcome may result from sample heterogeneity when adverse and advantageous selection occur simultaneously and offset each other. Examining a large set of potential sources of selection effects, we find mainly that the holding of other supplemental health insurance policies, which is related to risk preferences, contributes to an advantageous selection in this insurance market. Our results suggest that even in the absence of a positive correlation between risk and insurance coverage, the German market for supplemental dental insurance suffers from information asymmetry, which is caused by multidimensional private information.

Suggested Citation

  • Jan Michael Bauer & Jörg Schiller & Christopher Schreckenberger, 2020. "Heterogeneous selection in the market for private supplemental dental insurance: evidence from Germany," Empirical Economics, Springer, vol. 59(1), pages 205-231, July.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:1:d:10.1007_s00181-019-01632-5
    DOI: 10.1007/s00181-019-01632-5
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    More about this item

    Keywords

    Asymmetric information; Advantageous selection; Adverse selection; Dental insurance; Supplemental health insurance;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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