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Workers' Moral Hazard and Insurer Effort in Disability Insurance

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  • Koning, Pierre

    (Vrije Universiteit Amsterdam)

  • van Lent, Max

    (Leiden University)

Abstract

Disability Insurance (DI) may affect workers' outcomes such as their probability to enter DI, to recover, and their employment. Supplementary insurance may increase these moral hazard effects, but also increases the financial gains of private insurers to reduce benefit costs. With increased insurer activities to prevent and reintegrate workers, the overall effects of increased insurance coverage on workers' outcomes are thus ambiguous. This paper aims to separate worker and insurer responses to increased insurance, using unique administrative data on firms' supplementary DI insurance contracts. Using a Two-Way Fixed-Effects model on the sickness and employment rates of worker cohorts with and without supplementary contracts at some point in time, we find that insurer efforts compensate workers' moral hazard effects.

Suggested Citation

  • Koning, Pierre & van Lent, Max, 2022. "Workers' Moral Hazard and Insurer Effort in Disability Insurance," IZA Discussion Papers 15164, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15164
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    References listed on IDEAS

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    More about this item

    Keywords

    disability insurance; private insurance; moral hazard; insurer effort; return-to-work policies;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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