 “They do know what they are doing... at least most of them.†Asymmetric Information in the (private) Disability InsuranceMartin Spindler ()
No 201209, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy Abstract: In this paper we analyze asymmetric information in the (private) disability insurance, which has not been analyzed before in the literature, but covers one of the most important risks faced by individuals in modern society, namely the loss of human capital. We show that there is asymmetric information, but the extent depends on the amount of coverage. Moreover, the option of choosing an annual adjustment of the insured sum has strong predictive power both for the occurrence of an accident and the chosen coverage, although it should be irrelevant from the point of theory. This result shows new ways to design contracts and variable selection for risk classification. In contrast to most previous studies, we also explicitly take into consideration unobserved heterogeneity by applying finite mixture models and so called ‘unused’ observables. JEL-codes: C12 C14 D82 G22 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mea:meawpa:201209 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 München, Germany. |
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