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The Characteristics of the Demand for Private Long Term Care Insurance in France

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  • Nouet, Sébastien
  • Plisson, Manuel
  • Nayaradou, Maximilien
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    Abstract

    Private insurance for long-term care is underdeveloped in European countries and in the US. In order to better understand this actual market failure, it is interesting to study the characteristics of insurance demand. This paper uses banking data to estimate the likelihood to buy a long-term care insurance contract. Using a logit model and a bootstrap method, we show that belonging to upper classes reduces the likelihood of purchase. At the opposite, being a worker or an employee increases the likelihood. Interaction variables show that women belonging to farmer, worker or employee classes and having some asset have 5 times more chances to buy an insurance than the rest of population. This ratio is equivalent for the oldest individuals of this category of women. This article shows that insurers are in a favorable position to develop their future long-term care portfolio because the effect of an aging population will make currently defined targets more representative during the next twenty years. This article thus provides insurers with a key decision-making tool: a microeconomic model for calculating the probability of requiring dependency insurance that can be applied to their client portfolio. This model, which is the sole empirical one using French data available in current literature, provides two benefits. On the one hand, it enables French insurers to concentrate their long-term marketing efforts on target categories and, more generally, it guides them in implementing their marketing strategy by allowing them to make their own portfolio simulations. Results obtained complete existing theoretical and empirical results that are already found in the literature. The present model can therefore help insurers to better target long term care insurance products and undoubtedly increase subscription to these products. In this way, the model can contribute to strengthening the long term care insurance product offer.

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    Bibliographic Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5054.

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    Date of creation: 2007
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    Publication status: Published in Working Paper Chaire Transitions démographiques transitions économiques, 2007
    Handle: RePEc:dau:papers:123456789/5054

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    Web page: http://www.dauphine.fr/en/welcome.html
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    Related research

    Keywords: long-term care; long-term care insurance; insurance demand; dépendance; assurance dépendance; demande d'assurance;

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    References

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    1. Jeffrey R. Brown & Amy Finkelstein, 2004. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," NBER Working Papers 10989, National Bureau of Economic Research, Inc.
    2. Olivia S Mitchell & John Piggott & Satoshi Shimizutani, 2008. "An Empirical Analysis of Patterns in the Japanese Long-Term Care Insurance System," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 33(4), pages 694-709, October.
    3. Amy Finkelstein & Kathleen McGarry, 2006. "Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 96(4), pages 938-958, September.
    4. Brown, Jeffrey R. & Finkelstein, Amy, 2007. "Why is the market for long-term care insurance so small?," Journal of Public Economics, Elsevier, vol. 91(10), pages 1967-1991, November.
    5. Volker Meier, 1998. "Long-Term Care Insurance and Life Insurance Demand," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 23(1), pages 49-61, June.
    6. Lucinda Trigo-Gamarra, 2008. "Reasons for the Coexistence of Different Distribution Channels: An Empirical Test for the German Insurance Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 33(3), pages 389-407, July.
    7. 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.
    8. Steven Stern, 1995. "Estimating Family Long-Term Care Decisions in the Presence of Endogenous Child Characteristics," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 551-580.
    9. Costa-Font, Joan & Rovira-Forns, Joan, 2008. "Who is willing to pay for long-term care insurance in Catalonia?," Health Policy, Elsevier, vol. 86(1), pages 72-84, April.
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