Insurance Search and Switching Behavior

Maarten Lindeboom (), Bas van der Klaauw and Jonneke Bolhaar

No 7942, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper looks into the search behavior of consumers in the market for health insurance contracts. We consider the recent health insurance reform in The Netherlands, where a private-public mix of insurance provision was replaced by a system based on managed competition. Although all insurers offer the same basic package (determined by the government), there is substantial premium dispersion. We develop a simple consumer search model containing the main features of the Dutch health insurance system. This model provides us with a number of hypotheses, which we test using data from the Dutch Health Care Consumer Panel. The data confirm the standard predictions on consumer choice (i.e. there is adverse selection and a lower premium increases coverage). We also find that consumers with lower search costs are more likely to receive a group contract offer. This generates a situation of price discrimination where individuals without group contracts and higher search costs pay higher premiums and buy lower insurance coverage.

Keywords: Adverse selection; Consumer search; Group contracts; Health insurance; Managed competition (search for similar items in EconPapers)
JEL-codes: D82 D83 I18 (search for similar items in EconPapers)
Date: 2010-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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