Long term care insurance puzzle
AbstractThe 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.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010023.
Date of creation: 01 May 2010
Date of revision:
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long term care insurance; dependence; annuity puzzle;
Other versions of this item:
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-10-02 (Economics of Ageing)
- NEP-ALL-2010-10-02 (All new papers)
- NEP-IAS-2010-10-02 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
- Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-19, December.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Why do so few people buy long-term care insurance?
by Economic Logician in Economic Logic on 2010-10-26 14:32:00
- CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012.
"The economics of long-term care: a survey,"
CORE Discussion Papers
2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Mireille Elbaum, 2011. "Le financement de la protection sociale : quelles perspectives au-delà des solutions miracles," Documents de Travail de l'OFCE 2011-27, Observatoire Francais des Conjonctures Economiques (OFCE).
- Cremer, Helmuth & Roeder, Kerstin, 2013.
"Long-term care policy, myopia and redistribution,"
Journal of Public Economics,
Elsevier, vol. 108(C), pages 33-43.
- Cremer, Helmuth & Roeder, Kerstin, 2011. "Long-term care policy, myopia and redistribution," IDEI Working Papers 723, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2012.
- Cremer, Helmuth & Roeder, Kerstin, 2011. "Long-term care policy, myopia and redistribution," TSE Working Papers 12-314, Toulouse School of Economics (TSE), revised May 2012.
- Helmuth Cremer & Kerstin Roeder, 2012. "Long-Term Care Policy, Myopia and Redistribution," CESifo Working Paper Series 3843, CESifo Group Munich.
- DE DONDER, Philippe & LEROUX, Marie-Louise, 2013. "Behavioral biases and long term care insurance: A political economy approach," CORE Discussion Papers 2013020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ponthiere Gregory, 2012.
"Long Term Care, Altruism and Socialization,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 13(2), pages 1-47, November.
- Grégory Ponthière, 2011. "Long-Term Care, Altruism and Socialization," Working Papers halshs-00622385, HAL.
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