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Prevention programs and advantageous selection: Evidence for Long-Term care insurance

Author

Listed:
  • Steve Briand

    (LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

  • Jean-Yves Lesueur

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique, Université de Lyon)

Abstract

Prevention programs aim to reduce health risks by encouraging changes in behavior. Asymmetric information is often proposed as an explanation of the thinness of Long-Term Care (LTC) insurance markets, and we here theoretically and empirically consider how this is affected by prevention programs. Theoretically, the trade-off between self-protection and insurance changes: it is indeterminate in general and there is no impact on insurance coverage for a fair premium. These equilibrium properties are tested empirically with French original survey data on policyholders of an insurance company, which elicit the willingness to participate in a prevention program and contain additional information on preventive behaviors. The econometric results show that ex-ante moral hazard is rather driven by individual preferences. Moreover, program participation encourages both self-protection and LTC insurance purchase: this reveals initially-unobservable advantageous selection. JEL codes: D82, I11, J14, D91

Suggested Citation

  • Steve Briand & Jean-Yves Lesueur, 2020. "Prevention programs and advantageous selection: Evidence for Long-Term care insurance," Working Papers hal-05022971, HAL.
    • Handle: RePEc:hal:wpaper:hal-05022971
    Note: View the original document on HAL open archive server: https://hal.science/hal-05022971v1
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    More about this item

    Keywords

    D82; I11; J14; D91; Self-protection; Long-term care insurance; Asymmetric information; Prevention program;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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