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Economics of Scale and Sorting in Pure vs. Mutual Insurance Societies: Evidence from Historical Data

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Abstract

Based on unique Swedish historical panel data on voluntary Swedish sick insurance societies 1902-1910, we test the hypothesis od economies of scale in sick insurance provision. We report results indicating that pure insurance societies charging only premium ex ante do not exhibit returns to scale, while mutual insurance societies, who levy both an ex ante premium and an ex post assessment, do. We argue that this is due to a sorting mechanism implying that pure insurance societies attract high risk workers as they expand.

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  • Nekby, Lena & Arai, Mahmood & Lundholm, Michael, 2001. "Economics of Scale and Sorting in Pure vs. Mutual Insurance Societies: Evidence from Historical Data," Research Papers in Economics 2001:9, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2001_0009
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    Keywords

    friendly societies; sick insurance; health insurance; returns to scale;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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