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Uninsured by Choice? A choice experiment on long term care insurance

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  • Akaichi, Faical
  • Costa-Font, Joan
  • Frank, Richard

Abstract

We examine evidence from two unique discrete choice experiments (DCE) on long term care insurance and values several of its relevant attributes. More specifically, the experiments examine choices made by a large sample made of 15,298 individuals in the United States with and without insurance. We study the valuation of a number of insurance attributes, namely the daily insurance benefit, insurance coverage, the compulsory and voluntary nature of the insurance policy design, alongside the costs (insurance premium) and health requirements. This paper elicits both respondents’ preferences and willingness to pay (WTP) for these care insurance's attributes using a random parameter logit model, and assesses the heterogeneity of choice responses using demographic, socioeconomic and attitudinal motivations to segment response to insurance choices. We find that an increase in the insurance premium by an additional $100 would reduce insurance uptake by 1pp. Insurance policy uptake is higher when it provides benefits for the lifetime (the monthly marginal WTP being $178.64), and voluntary (the monthly marginal WTP increases by an extra $74.71) as opposed to universal, and when it forgoes health checks (the monthly marginal WTP increases by an extra 28US$).

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  • Akaichi, Faical & Costa-Font, Joan & Frank, Richard, 2020. "Uninsured by Choice? A choice experiment on long term care insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 422-434.
  • Handle: RePEc:eee:jeborg:v:173:y:2020:i:c:p:422-434
    DOI: 10.1016/j.jebo.2019.07.012
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    Cited by:

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    2. Lambregts, Timo R. & Schut, Frederik T., 2020. "Displaced, disliked and misunderstood: A systematic review of the reasons for low uptake of long-term care insurance and life annuities," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    3. Eling, Martin & Ghavibazoo, Omid & Hanewald, Katja, 2021. "Willingness to take financial risks and insurance holdings: A European survey," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    4. Shang Wu & Hazel Bateman & Ralph Stevens & Susan Thorp, 2022. "Flexible insurance for long‐term care: A study of stated preferences," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(3), pages 823-858, September.
    5. Bonsang, Eric & Costa-Font, Joan, 2020. "Behavioral regularities in old age planning," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 297-300.
    6. Jonas R. Jahnert & Hato Schmeiser & Florian Schreiber, 2022. "Pricing strategies in the German term life insurance market: An empirical analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(1), pages 19-34, April.
    7. de Bresser, Jochem & Knoef, Marike & van Ooijen, Raun, 2021. "Preferences for In-Kind and In-Cash Home Care Insurance," Discussion Paper 2021-033, Tilburg University, Center for Economic Research.
    8. de Bresser, Jochem & Knoef, Marike & van Ooijen, Raun, 2021. "Preferences for In-Kind and In-Cash Home Care Insurance," Other publications TiSEM fca83bd4-09cc-4072-81c6-0, Tilburg University, School of Economics and Management.
    9. He, Alex Jingwei & Qian, Jiwei & Chan, Wai-sum & Chou, Kee-lee, 2021. "Preferences for private long-term care insurance products in a super-ageing society: A discrete choice experiment in Hong Kong," Social Science & Medicine, Elsevier, vol. 270(C).
    10. Ugarte Montero, Andrey & Wagner, Joël, 2023. "On potential information asymmetries in long-term care insurance: A simulation study using data from Switzerland," Insurance: Mathematics and Economics, Elsevier, vol. 111(C), pages 230-241.
    11. Wang, Qun & Abiiro, Gilbert Abotisem & Yang, Jin & Li, Peng & De Allegri, Manuela, 2021. "Preferences for long-term care insurance in China: Results from a discrete choice experiment," Social Science & Medicine, Elsevier, vol. 281(C).

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    More about this item

    Keywords

    Long term care insurance; Constrained choices; Self-insurance; Behavioral constraints; Insurance design; Choice experiments;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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