Prevention programs and advantageous selection: Evidence for Long-Term care insurance

Steve Briand () and Jean-Yves Lesueur ()
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Steve Briand: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Jean-Yves Lesueur: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique, Université de Lyon

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Abstract: Prevention programs aim to reduce health risks by encouraging changes in behavior. Asymmetric information is often proposed as an explanation of the thinness of Long-Term Care (LTC) insurance markets, and we here theoretically and empirically consider how this is affected by prevention programs. Theoretically, the trade-off between self-protection and insurance changes: it is indeterminate in general and there is no impact on insurance coverage for a fair premium. These equilibrium properties are tested empirically with French original survey data on policyholders of an insurance company, which elicit the willingness to participate in a prevention program and contain additional information on preventive behaviors. The econometric results show that ex-ante moral hazard is rather driven by individual preferences. Moreover, program participation encourages both self-protection and LTC insurance purchase: this reveals initially-unobservable advantageous selection. JEL codes: D82, I11, J14, D91

Keywords: D82; I11; J14; D91; Self-protection; Long-term care insurance; Asymmetric information; Prevention program (search for similar items in EconPapers)
Date: 2020-06-25
Note: View the original document on HAL open archive server: https://hal.science/hal-05022971v1
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