The Characteristics of the Demand for Private Long Term Care Insurance in France
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.
|Date of creation:||2007|
|Date of revision:|
|Publication status:||Published in Working Paper Chaire Transitions démographiques transitions économiques, 2007|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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