Selection Behaviour in the Market for Private Complementary Long-term Care Insurance in Germany

Abstract

Using data from an insurance company, we examine the selection behaviour in the German market for private complementary long-term care insurance (CompLTCI). We provide a detailed analysis of the holding, the uptake and the lapse of CompLTCI policies. The analysis identifies the preference for insurance, the occupation as well as the residential location as unused observables. Our findings suggest that the socioeconomic status is a robust factor in explaining the uptake and lapse behaviour in the German market for CompLTCI. More generally, our findings indicate that the mere identification of unused observables is insufficient to derive robust conclusions about the redistribution between different risk types in insurance markets with long-term policies.

Keywords: Advantageous selection; Lapse; Long-term care insurance

JEL Classification: D82, G22