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Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics

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  • Christiansen, Marcus

    ()

  • Eling, Martin

    ()

  • Schmidt, Jan-Philipp

    ()

  • Zirkelbach, Lorenz

    ()

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    Abstract

    Long-term health insurance contracts provide policyholders with the option of lapsing coverage or switching to another tariff within the same insurance company. We empirically analyze policyholder behavior regarding contract commitment in a large dataset of German private health insurance contracts. We show that short-term as well as long-term premium development, along with premium adjustment frequency, affect lapse and tariff switch rates. Moreover, the sales channel has a strong impact on switching behavior, indicating that policyholder choice is not fully independent of sales representatives. Our results are important for risk assessment and risk management of portfolios of health insurance contracts and provide better understanding of the dynamics of policyholder behavior in health insurance.

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    File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1223.pdf
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    Bibliographic Info

    Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1223.

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    Length: 26 pages
    Date of creation: Dec 2012
    Date of revision:
    Handle: RePEc:usg:sfwpfi:2012:23

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    1. Martina Eckardt & Solvig Räthke-Döppner, 2010. "The Quality of Insurance Intermediary Services-Empirical Evidence for Germany," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 667-701.
    2. Igal Hendel & Alessandro Lizzeri, 2003. "The Role Of Commitment In Dynamic Contracts: Evidence From Life Insurance," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 299-327, February.
    3. Pauly, Mark V & Kunreuther, Howard & Hirth, Richard, 1995. "Guaranteed Renewability in Insurance," Journal of Risk and Uncertainty, Springer, vol. 10(2), pages 143-56, March.
    4. Morin, Roger A & Fernandez Suarez, Antonio, 1983. " Risk Aversion Revisited," Journal of Finance, American Finance Association, vol. 38(4), pages 1201-16, September.
    5. Crocker, Keith J & Moran, John R, 2003. " Contracting with Limited Commitment: Evidence from Employment-Based Health Insurance Contracts," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 694-718, Winter.
    6. David M. Cutler & Sarah Reber, 1996. "Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection," NBER Working Papers 5796, National Bureau of Economic Research, Inc.
    7. Cutler, David & Lincoln, Bryan & Zeckhauser, Richard, 2010. "Selection stories: Understanding movement across health plans," Journal of Health Economics, Elsevier, vol. 29(6), pages 821-838, December.
    8. Thomas Davidoff, 2009. "Housing, Health, and Annuities," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 31-52.
    9. Roger Feldman & Michael Finch & Bryan Dowd & Steven Cassou, 1989. "The Demand for Employment-Based Health Insurance Plans," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 115-142.
    10. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
    11. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
    12. Weiyu Kuo & Chenghsien Tsai & Wei-Kuang Chen, 2003. "An Empirical Study on the Lapse Rate: The Cointegration Approach," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 489-508.
    13. 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.
    14. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-73, June.
    15. Goldman, Dana & Leibowitz, Arleen & Robalino, David, 2004. "Employee Responses to Health Insurance Premium Increases," MPRA Paper 12004, University Library of Munich, Germany.
    16. Jean Pinquet & Montserrat Guillén & Mercedes Ayuso, 2011. "Commitment and Lapse Behavior in Long-Term Insurance: A Case Study," Post-Print hal-00374303, HAL.
    17. van den Berg, Bernard & Van Dommelen, Paula & Stam, Piet & Laske-Aldershof, Trea & Buchmueller, Tom & Schut, Frederik T., 2008. "Preferences and choices for care and health insurance," Social Science & Medicine, Elsevier, vol. 66(12), pages 2448-2459, June.
    18. Buchmueller, Thomas C. & Feldstein, Paul J., 1997. "The effect of price on switching among health plans," Journal of Health Economics, Elsevier, vol. 16(2), pages 231-247, April.
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