Workers' Moral Hazard and Insurer Effort in Disability Insurance

Pierre Koning and Max van Lent ()
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Max van Lent: Leiden University

No 15164, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Disability Insurance (DI) may affect workers' outcomes such as their probability to enter DI, to recover, and their employment. Supplementary insurance may increase these moral hazard effects, but also increases the financial gains of private insurers to reduce benefit costs. With increased insurer activities to prevent and reintegrate workers, the overall effects of increased insurance coverage on workers' outcomes are thus ambiguous. This paper aims to separate worker and insurer responses to increased insurance, using unique administrative data on firms' supplementary DI insurance contracts. Using a Two-Way Fixed-Effects model on the sickness and employment rates of worker cohorts with and without supplementary contracts at some point in time, we find that insurer efforts compensate workers' moral hazard effects.

Keywords: insurer effort; moral hazard; private insurance; disability insurance; return-to-work policies (search for similar items in EconPapers)
JEL-codes: G22 G52 J21 J3 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2022-03
New Economics Papers: this item is included in nep-hea, nep-ias and nep-lma
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Published - published in: Journal of Risk and Insurance, 2024, 91 (4), 1049 - 1088

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