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A Canadian Parlor Room-Type Approach to the Long-Term Care Insurance Puzzle

Author

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  • M. Martin Boyer
  • Philippe De Donder
  • Claude Fluet
  • Marie-Louise Leroux
  • Pierre-Carl Michaud

Abstract

We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers.

Suggested Citation

  • M. Martin Boyer & Philippe De Donder & Claude Fluet & Marie-Louise Leroux & Pierre-Carl Michaud, 2018. "A Canadian Parlor Room-Type Approach to the Long-Term Care Insurance Puzzle," Cahiers de recherche 1804, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    • Handle: RePEc:lvl:criacr:1804
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    1. Martin Boyer & Philippe Donder & Claude Fluet & Marie-Louise Leroux & Pierre-Carl Michaud, 2019. "Long-term care risk misperceptions," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(2), pages 183-215, April.

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    More about this item

    Keywords

    Long-term care puzzle; Risk perceptions; Supply and demand of insurance; Government programs;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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