Temporal Profitability and Pricing of Long-Term Care Insurance

Equilibrium models of dynamic insurance markets can be bifurcated according to underlying assumptions about whether or not insurers commit to long-term contracts. The difference is substantial in that commitment models imply price highballing over time while no-commitment models indicate price lowba...

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Published in:The Journal of risk and insurance 2004-12, Vol.71 (4), p.677-705
Main Authors: Cox, Larry A., Ge, Yanling
Format: Article
Language:English
Subjects:
Adverse selection
Age
Analysis
Automobile insurance
Claims adjustment
Contracts
Equilibrium
Insurance coverage
Insurance industry
Insurance markets
Insurance policies
Insurance premiums
Insurance providers
Insurance regulation
Life insurance
Long term care insurance
Long term health care
Loss ratios
Management
Mathematical models
Net losses
Policyholders
Prices
Pricing policies
Profitability
Profits
Property insurance
Studies
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cited_by cdi_FETCH-LOGICAL-c5748-a20f13fa0ee7b5489d0a787d94b3ee6d05a545a14b6602465b84c8548978a9ac3
cites cdi_FETCH-LOGICAL-c5748-a20f13fa0ee7b5489d0a787d94b3ee6d05a545a14b6602465b84c8548978a9ac3
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container_title The Journal of risk and insurance
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creator Cox, Larry A.
Ge, Yanling
description Equilibrium models of dynamic insurance markets can be bifurcated according to underlying assumptions about whether or not insurers commit to long-term contracts. The difference is substantial in that commitment models imply price highballing over time while no-commitment models indicate price lowballing. Extant empirical studies provide mixed evidence, however. We use long-term care (LTC) insurance data, which allow us both to better control for heterogeneous, observable risk, to examine dynamic profitability and pricing in a relatively young, innovative insurance market. Our tests generally indicate temporal price lowballing, thereby providing support for the no-commitment models.
doi_str_mv 10.1111/j.0022-4367.2004.00108.x
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source EBSCOhost Business Source Ultimate; ABI/INFORM Archive; JSTOR Archival Journals and Primary Sources Collection; EconLit with Full Text; ABI/INFORM Global; Wiley-Blackwell Read & Publish Collection
subjects Adverse selection
Age
Analysis
Automobile insurance
Claims adjustment
Contracts
Equilibrium
Insurance coverage
Insurance industry
Insurance markets
Insurance policies
Insurance premiums
Insurance providers
Insurance regulation
Life insurance
Long term care insurance
Long term health care
Loss ratios
Management
Mathematical models
Net losses
Policyholders
Prices
Pricing policies
Profitability
Profits
Property insurance
Studies
title Temporal Profitability and Pricing of Long-Term Care Insurance
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