Access to Credit Reduces the Value of Insurance

34 Pages Posted: 13 Apr 2024

See all articles by Sonia Jaffe

Sonia Jaffe

University of Chicago

Anup Malani

University of Chicago - Law School; National Bureau of Economic Research (NBER); University of Chicago Pritzker School of Medicine; Resources for the Future

Julian Reif

University of Illinois at Urbana-Champaign

Multiple version iconThere are 2 versions of this paper

Date Written: April 11, 2024

Abstract

We analyze the value of insurance when individuals have access to credit markets. Loans allow consumers to smooth financial shocks over time, decreasing the value of consumption smoothing from insurance. We derive formulas for the value of insurance that can be taken to data, and show how that value depends on individual characteristics and features of loans. We estimate that access to a five-year loan decreases the values of community- and experience-rated insurance for the average beneficiary by $232–$366 (58–61%). Even for the sickest decile, this loan access reduces the value of community-rated insurance by $1,099 (17%).

Keywords: insurance, credit markets

JEL Classification: D1, I13

Suggested Citation

Jaffe, Sonia and Malani, Anup and Reif, Julian, Access to Credit Reduces the Value of Insurance (April 11, 2024). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2024-43, Available at SSRN: https://ssrn.com/abstract=4791726 or http://dx.doi.org/10.2139/ssrn.4791726

Sonia Jaffe

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Anup Malani (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9602 (Phone)
773-702-0730 (Fax)

HOME PAGE: http://www.law.uchicago.edu/faculty/malani/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Chicago Pritzker School of Medicine

Chicago, IL 60637
United States

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

Julian Reif

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL Champaign 61820
United States

HOME PAGE: http://www.julianreif.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
24
Abstract Views
118
PlumX Metrics