Abstract

http://ssrn.com/abstract=648942
 
 

References (14)



 
 

Citations (8)



 


 



Dynamic Inefficiencies in Insurance Markets: Evidence from Long-Term Care Insurance


Amy Finkelstein


Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Amir Sufi


University of Chicago - Booth School of Business; NBER

Kathleen M. McGarry


University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

January 2005

NBER Working Paper No. w11039

Abstract:     
We examine whether unregulated, private insurance markets efficiently provide insurance against reclassification risk (the risk of becoming a bad risk and facing higher premiums). To do so, we examine the ex-post risk type of individuals who drop their long-term care insurance contracts relative to those who are continually insured. Consistent with dynamic inefficiencies, we find that individuals who drop coverage are of lower risk ex-post than individuals who were otherwise-equivalent at the time of purchase but who do not drop out of their contracts. These findings suggest that dynamic market failures in private insurance markets can preclude the efficient provision of insurance against reclassification risk.

Number of Pages in PDF File: 23

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Date posted: February 4, 2005  

Suggested Citation

Finkelstein, Amy and Sufi, Amir and McGarry, Kathleen M., Dynamic Inefficiencies in Insurance Markets: Evidence from Long-Term Care Insurance (January 2005). NBER Working Paper No. w11039. Available at SSRN: http://ssrn.com/abstract=648942

Contact Information

Amy Finkelstein (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-588-0361 (Phone)
617-868-7242 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Amir Sufi
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
NBER
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Kathleen M. McGarry
University of California, Los Angeles (UCLA) - Department of Economics ( email )
Box 951477
405 Hilgard Avenue
Los Angeles, CA 90095-1477
United States
310-206-2833 (Phone)
310-825-9528 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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