On potential information asymmetries in long-term care insurance: a simulation study using data from Switzerland

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License: CC BY 4.0
Serval ID
serval:BIB_79CBFA1231DD
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
On potential information asymmetries in long-term care insurance: a simulation study using data from Switzerland
Journal
Insurance: Mathematics and Economics
Author(s)
Ugarte A., Wagner J.
Publication state
Published
Issued date
2023
Peer-reviewed
Oui
Volume
111
Pages
230-241
Language
english
Abstract
The long-term care insurance (LTCI) market in Switzerland is still in a very early development stage. In this work, we make use of a representative sample of the Swiss population to simulate the likely effects of previously discovered information asymmetries in the LTCI market. By resorting to LTCI preferences of potential customers, and using Monte Carlo simulations, we provide estimations of the expected probability and duration of dependence indicators. Thereby, we compare the frequency and severity of the sub-population that has shown interest in LTCI with the rest in different mortality scenarios. While in the Swiss demographic context, individuals have a high probability to experience loss of autonomy in their lifetime, we do not find evidence to believe that those interested in LTCI coverage are so based on privileged information about them being at greater risk. In fact, we discover that most people are not aware of their own risk to lose autonomy, which makes potential adverse selection in the LTCI market rather difficult.
Keywords
long-term care, insurance, dependence, information asymmetry, adverse selection
Open Access
Yes
Create date
01/05/2023 9:24
Last modification date
27/05/2023 7:12
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