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Long-Term Care: Risk Description of a Spanish Portfolio and Economic Analysis of the Timing of Insurance Purchase

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  • Montserrat Guillén

    () (Department Econometria, Estadística i Economia Espanyola, RFA-IREA, University of Barcelona, Diagonal, 690, Barcelona 08034, Spain.)

  • Jean Pinquet

    () (Ecole Polytechnique, Département d'Economie, Palaiseau 91128, France.)

Abstract

This paper analyses the rationale of long-term care (LTC) insurance purchasing from a statistical analysis of insurance data and a life cycle model. We make a short survey of the pros and cons of LTC insurance purchase. Then risk distributions in the occurrence and duration dimension are estimated on a Spanish portfolio. Calendar effects are estimated besides age and gender. These statistical results are integrated in a life cycle model of savings and insurance purchasing. A numerical illustration is also provided, which leads to an optimal age of 40 years for insurance purchase. The Geneva Papers (2008) 33, 659–672. doi:10.1057/gpp.2008.33

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  • Montserrat Guillén & Jean Pinquet, 2008. "Long-Term Care: Risk Description of a Spanish Portfolio and Economic Analysis of the Timing of Insurance Purchase," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(4), pages 659-672, October.
  • Handle: RePEc:pal:gpprii:v:33:y:2008:i:4:p:659-672
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    References listed on IDEAS

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    1. Brown, Jeffrey R. & Finkelstein, Amy, 2007. "Why is the market for long-term care insurance so small?," Journal of Public Economics, Elsevier, pages 1967-1991.
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    5. Paul A. Samuelson, 2011. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," World Scientific Book Chapters,in: THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 31, pages 465-472 World Scientific Publishing Co. Pte. Ltd..
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    8. 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.
    9. Leung, Siu Fai, 1994. "Uncertain Lifetime, the Theory of the Consumer, and the Life Cycle Hypothesis," Econometrica, Econometric Society, vol. 62(5), pages 1233-1239, September.
    10. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
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    Cited by:

    1. Jean Pinquet & Montserrat Guillén & Mercedes Ayuso, 2011. "Commitment and Lapse Behavior in Long‐Term Insurance: A Case Study," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(4), pages 983-1002, December.
    2. Jean Pinquet, 2008. "Quel avenir pour l'assurance dépendance? Leçons de l'expérience américaine," Post-Print hal-00396151, HAL.

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