Working paper

Long-Term Care Insurance: Information Frictions and Selection

Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud

Abstract

We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. We find that information frictions are pervasive. We measure the welfare losses associated with these three causes in a framework that also allows for selection. We show that information frictions reduce equilibrium take-up and lead to large welfare loss while selection plays little role.

Keywords

Long-term care insurance; adverse selection; stated-preference; health; insurance;

Reference

Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud, Long-Term Care Insurance: Information Frictions and Selection, TSE Working Paper, n. 19-1034, September 2019.

See also

Published in

TSE Working Paper, n. 19-1034, September 2019