Use of Shared and Private Information in Long-Term Care Risk Perceptions

Lisa Voois, Teresa Bago d-Uva and Owen O'Donnell
Additional contact information
Lisa Voois: Erasmus University Rotterdam
Teresa Bago d-Uva: Erasmus University Rotterdam
Owen O'Donnell: Erasmus University Rotterdam

No 26-013/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Misperception of long-term care (LTC) risk may distort insurance and saving decisions. Comparing older Americans’ subjective probabilities of nursing home entry with realized outcomes, we find LTC risk perceptions are inaccurate, partly due to inappropriate weighting of risk factors insurers can observe. Risk perceptions capture only 37% of the potential discriminatory power of this shared information. Private information offsets only one third of the resulting inaccuracy. LTC insurance take-up is positively associated with perceived risk even after adjusting for confounders and reverse causality. These findings are consistent with selection out of insurance partly due to underutilization of shared information.

Keywords: subjective probability; information friction; mental gap; cognitive bias; behavioral insurance; long-term care insurance (search for similar items in EconPapers)
JEL-codes: D82 D83 I13 (search for similar items in EconPapers)
Date: 2026-03-20
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/26013.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20260013

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().