Long term care insurance puzzle

Pierre Pestieau and Gregory Ponthiere

No 2010023, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The purpose of this paper is to examine the alternative explanatory factors of the so-called long term care insurance puzzle, namely the fact that so few people purchase a long term care insurance whereas this would seem to be a rational conduct given the high probability of dependence and the high costs of long term care. For that purpose, we survey various theoretical and empirical studies of the demand and supply of long term care insurance. We discuss the vicious circle in which the long term care insurance market is stuck: that market is thin because most people find the existing insurance products too expensive, and, at the same time, the products supplied by insurance companies are too expensive because of the thinness of the market. Moreover, we also show that, whereas some explanations of the puzzle involve a perfect rationality of agents on the LTC insurance market, others rely, on the contrary, on various behavioral imperfections.

Keywords: long term care insurance; dependence; annuity puzzle (search for similar items in EconPapers)
JEL-codes: G22 I18 J14 (search for similar items in EconPapers)
Date: 2010-05-01
New Economics Papers: this item is included in nep-age and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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https://sites.uclouvain.be/core/publications/coredp/coredp2010.html (application/pdf)

Related works:
Chapter: Long-Term Care Insurance Puzzle (2012)
Working Paper: The Long Term Care Insurance Puzzle (2011)
Working Paper: The Long Term Care Insurance Puzzle (2011)
Working Paper: Long term care insurance puzzle (2010)
Working Paper: Long term care insurance puzzle (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2010023

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