Insurance Commons^™

The True Cost Of Auto Insurance In The Mountain West, 2022, Annie Vong, Saha Salahi, Caitlin J. Saladino, William E. Brown Jr.

Transportation & Infrastructure

This fact sheet examines data on average annual premiums, percent of income spent on auto insurance, and life events associated with the rising cost of auto insurance in the Mountain West (Arizona, Colorado, Nevada, New Mexico, and Utah). The original report includes data on national averages for auto insurance premiums for all fifty states.

Third Party Moral Hazard And The Problem Of Insurance Externalities, Gideon Parchomovsky, Peter Siegelman

All Faculty Scholarship

Insurance can lead to loss or claim-creation not just by insureds themselves, but also by uninsured third parties. These externalities—which we term “third party moral hazard”—arise because insurance creates opportunities both to extract rents and to recover for otherwise unrecoverable losses. Using examples from health, automobile, kidnap, and liability insurance, we demonstrate that the phenomenon is widespread and important, and that the downsides of insurance are greater than previously believed. We explain the economic, social and psychological reasons for this phenomenon, and propose policy responses. Contract-based methods that are traditionally used to control first-party moral hazard can be welfare-reducing in …

An Examination Of Types Of Health Insurance And The Reported Prevalence Of Autism In The United States, Jennifer L. Thompson

Dissertations

The prevalence of Autism Spectrum Disorders continues to rise despite barriers of changes to diagnostic criteria and lack of insurance coverage. Increases in prevalence affect costs associated with a disorder since cost of health care services are often estimated based on utilization of services. This can also affect an individual’s ability to access to health care services. To equitably distribute autism services to individuals an accurate estimation of the true prevalence of autism is needed.

Access to health care can be influenced by the type of insurance coverage a person holds. Other factors, such as socio-economic status, ethnicity, location of …

Lessons Learned: Alejandro Latorre, Maryann Haggerty

Journal of Financial Crises

At the time of the 2007-09 global financial crisis, Alejandro Latorre was an assistant vice president at the Federal Reserve Bank of New York (FRBNY). He was active in the bailout of American International Group (AIG) from its inception to the end, when AIG repaid its outstanding obligations to both the Federal Reserve and the U.S. Treasury. This Lessons Learned summary is based on a Feb. 26, 2020, interview. He emphasized that the views discussed here are his own, not the views of anyone else currently or previously within the Federal Reserve System or the views of his current employer.

Lessons Learned: Sarah Dahlgren, Alec Buchholtz, Rosalind Z. Wiggins

Journal of Financial Crises

Sarah Dahlgren was the Executive Vice President and head of the Financial Institution Supervision Group at the Federal Reserve Bank of New York (FRBNY) during the crisis and instrumental in the rescue of American International Group (AIG). This Lessons Learned summary is drawn from a March 22, 2018, interview in which she gave her take on how central bankers can prepare for future crises.

Lessons Learned: Chester B. Feldberg, Maryann Haggerty

Journal of Financial Crises

Chester B. Feldberg worked for the Federal Reserve Bank of New York (FRBNY) for 36 years in a variety of roles. In the aftermath of the Global Financial Crisis, he served as a trustee for the AIG Credit Trust Facility (2009-2011). The trust was established in early 2009 to hold the equity stock of American International Group Inc. (AIG) that the U.S. government had received as a result of the 2008 AIG bailout. The three trustees were responsible for voting the stock, ensuring satisfactory corporate governance at AIG, and eventually disposing of the stock.

When he was named as a …

Lessons Learned: Eric Dinallo, Maryann Haggerty

Journal of Financial Crises

Eric Dinallo was New York State Superintendent of Insurance from January 2007 through July 2009. In New York, as throughout the United States, insurance companies are regulated at the state level. In his position as Superintendent, Dinallo oversaw the insurance operating companies of American International Group (AIG) within New York. AIG’s holding company, however, was supervised at the federal level. Much of AIG’s problems came from its non-insurance subsidiary AIG Financial Products (AIGFP), which was a major presence in the market for credit default swaps (CDS), a type of derivative that was a factor behind the 2007-09 financial crisis. This …

The Rescue Of American International Group Module E: Maiden Lane Iii, Lily S. Engbith, Devyn Jeffereis

Journal of Financial Crises

Starting in mid-2007, American International Group (AIG) faced increasing collateral calls from counterparties looking to protect their positions in credit default swap (CDS) contracts that AIG had written on residential and commercial collateralized debt obligations (CDOs) (US COP 2010, 28-30). Per these agreements, the AIG parent company was responsible for insuring the value of the CDOs against the risk of a negative credit event, such as default (GAO 2011, 5; US COP 2010, 29-30). AIG’s immediate need for liquidity on September 16, largely driven by a securities lending program and those collateral calls, prompted the Federal Reserve to lend the …

The Rescue Of American International Group Module D: Maiden Lane Ii, Lily S. Engbith, Devyn Jeffereis

Journal of Financial Crises

In September 2008, American International Group (AIG) faced increasing difficulty in returning cash collateral to counterparties looking to terminate, rather than roll over, their securities lending agreements, in part because the company had invested the collateral in residential mortgage-backed securities (RMBS), which were becoming illiquid. The Federal Reserve Bank of New York (FRBNY) provided liquidity to the company, including through the Securities Borrowing Facility (SBF), which allowed for the repayment of cash collateral but did not address the falling values of the RMBS. In November 2008, the Federal Reserve Board authorized the creation of Maiden Lane II (ML II), a …

The Rescue Of American International Group Module C: Aig Investment Program, Alec Buchholtz, Aidan Lawson

Journal of Financial Crises

In September 2008, the Federal Reserve Bank of New York (FRBNY) extended an $85 billion credit line to AIG to address its liquidity stresses, but AIG’s balance sheet remained under pressure. The insurance giant was projected to report large third-quarter losses and was at risk of being downgraded by major credit rating agencies. For these reasons, in early November 2008, the US Treasury invested $40 billion of Troubled Assets Relief Program (TARP) funds into AIG in exchange for 4 million shares of AIG Series D preferred stock and a warrant to purchase AIG common stock. The investment helped repay a …

The Rescue Of American International Group Module B: The Securities Borrowing Facility, Lily S. Engbith, Alec Buchholtz, Devyn Jeffereis

Journal of Financial Crises

In 2008, American International Group (AIG) was among the largest insurance corporations in the world and maintained a profitable securities lending program. However, AIG invested much of the cash collateral received from counterparties in residential mortgage-backed securities, whose value began to collapse rapidly and unexpectedly, creating liquidity strain for AIG when borrowers returned their securities. Because of these strains, credit downgrades, and losses, in September, the company sought assistance from the Federal Reserve which, on October 6, 2008, approved the establishment of the Securities Borrowing Facility by the Federal Reserve Bank of New York (FRBNY). The FRBNY agreed to loan …

The Impact Of The Capital Market, The Insurance Sector And The Mortgage Finance Sector On Economic Growth In Egypt, 2005-2019, Hana Anis

Theses and Dissertations

This thesis aims to explore the relationship between financial markets and economic growth in Egypt for the 15 years period, starting from 2005 to 2019. The study concentrates on the non-banking financial sector which includes the stock market, the debt market, the mortgage and the insurance sectors. The Vector Autoregressive (VAR) model is utilized to describe the relationship between GDP growth rate, as a proxy for economic growth, and a number of variables from the financial sector. Results of the analysis show that there is a significant relationship and statistical causality between the growth rate and the debt market, represented …

Uncertainty > Risk: Lessons For Legal Thought From The Insurance Runoff Market, Tom Baker

All Faculty Scholarship

Insurance ideas inform legal thought: from tort law, to health law and financial services regulation, to theories of distributive justice. Within that thought, insurance is conceived as an ideal type in which insurers distribute determinable risks through contracts that fix the parties’ obligations in advance. This ideal type has normative appeal, among other reasons because it explains how tort law might achieve in practice the objectives of tort theory. This ideal type also supports a restrictive vision of liability-based regulation that opposes expansions and supports cutbacks, on the grounds that uncertainty poses an existential threat to insurance markets.

Prior work …

Health Insurance Plan Design And Chronic Disease Management, Daniel E. Feldman

Electronic Theses and Dissertations

Each year, Americans spend more money on health care than any other industrialized nation, despite comparable mortality rates for people with risk factors for heart disease. The reasons for this lack of health care value in the US are numerous and complex – including market distortions like supplier-inflated pricing and regulatory structures that enable consumers to utilize ubiquitous, high-cost medical technologies that yield uncertain benefits. Health insurance, once thought to be an insignificant contributor to rising health spending, has changed considerably in the past few decades in ways that make it more accessible and more generous in coverage. Health insurance …

The Paradox Of Insurance, Gideon Parchomovsky, Peter Siegelman

All Faculty Scholarship

In this Article, we uncover a paradoxical phenomenon that has hitherto largely escaped the attention of legal scholars and economists, yet it has far-reaching implications for insurance law: loss-creation by uninsured parties caused by the presence of insurance. Contrary to the conventional wisdom, we show that insurance can create significant negative externalities by inducing third parties to engage in antisocial, illegal and unethical activities in order to extract money from insureds or insurers. Moreover, as the amount and scope of insurance grows, so does its distortionary effect on third parties. We term this phenomenon the paradox of insurance. The risk …

Private Equity Value Creation In Finance: Evidence From Life Insurance, Divya Kirti, Natasha Sarin

All Faculty Scholarship

This paper studies how private equity buyouts create value in the insurance industry, where decentralized regulation creates opportunities for aggressive tax and capital management. Using novel data on 57 large private equity deals in the insurance industry, we show that buyouts create value by decreasing insurers' tax liabilities; and by reaching-for-yield: PE firms tilt their subsidiaries' bond portfolios toward junk bonds while avoiding corresponding capital charges. Previous work on affiliated or "shadow" reinsurance and capital management misses the important role that private equity buyouts play as recent drivers of these phenomenon. The trend we document is of growing importance in …

Three Essays On Health Economics And Policy Evaluation, Shishir Shakya

Graduate Theses, Dissertations, and Problem Reports

This dissertation consists of three essays on the U.S. Health care policy. Each paragraph below refers to the three abstracts for the three chapters in this dissertation, respectively. I provide quantitative evidence on how much Prescription Drug Monitoring Programs (PDMPs) affects the retail opioid prescribing behaviors. Using the American Community Survey (ACS), I retrieve county-level high dimensional panel data set from 2010 to 2017. I employ three separate identification strategies: difference-in-difference, double selection post-LASSO, and spatial difference-in-difference. I compare how the retail opioid prescribing behaviors of counties, that are mandatory for prescribers to check the PDMP before prescribing controlled substances …

The Effect Of The 1918 Influenza Pandemic On U.S. Life Insurance Holdings, Dr. Joanna Short

Economics: Faculty Scholarship & Creative Works

This paper examines the effect of a sharp rise in mortality, the 1918 influenza epidemic, on life insurance holdings in the U.S. The BLS Cost of Living Surveys of 1918-1919 provide a unique opportunity to examine the effect of the pandemic—some households were surveyed before, and others during or shortly after the worst of the influenza outbreak. In addition, I use state-level insurance sales data to compare the increase in spending on insurance in states particularly hard hit by the epidemic, relative to those that were not. I find some evidence that, in the immediate aftermath of the epidemic, those …

Valuation And Risk Management Of Some Longevity And P&C Insurance Products, Yixing Zhao

Electronic Thesis and Dissertation Repository

Numerous insurance products linked to risky assets have emerged rapidly in the last couple of decades. These products have option-embedded features and typically involve at least two risk factors, namely interest and mortality risks. The need for models to capture risk factors' behaviours accurately is enormous and critical for insurance companies. The primary objective of this thesis is to develop pricing and hedging frameworks for option-embedded longevity products addressing correlated risk factors. Various methods are employed to facilitate the computation of prices and risk measures of longevity products including those with maturity benefits. Furthermore, in order to be prepared for …

Optimal Social Insurance With Informal Child Care, Christine Ho

Research Collection School Of Economics

The possibility of engaging in household child care may exacerbate the incentives of parents and grandparents to falsely claim disability benefits as households also get to save on formal child care costs. This paper considers a multi-generational family model with persistence in privately observed shocks and presents an efficient implementation case for subsidizing formal child care costs of the disabled. An implementation of the optimal scheme that consists of capped formal day care subsidies, non-linear income taxation and asset-testing is proposed. Simulations based on a parametrization that targets key features of the US labor and child care markets suggest that …

Actuarial Modeling And Analysis Of The Hong Kong Life Annuity Scheme, Koon Shing Kwong, Wai-Sum Chan, Johnny Siu-Hang Li

Research Collection School Of Economics

The Hong Kong Mortgage Corporation (HKMC) Limited, which was established in March 1997 and is wholly owned by the government of the Hong Kong Special Administrative Region, has a major mission to develop and provide different financial retirement instruments to Hong Kong residents to help address the income poverty of retirees. In June 2017, HKMC Annuity Limited, a wholly-owned subsidiary of the HKMC was incorporated to implement a new life annuity scheme which would be launched by mid-2018 to cater for the needs of cash-rich Hong Kong old age residents. The objective of the scheme is to provide an additional …

How Liability Insurers Protect Patients And Improve Safety, Tom Baker, Charles Silver

All Faculty Scholarship

Forty years after the publication of the first systematic study of adverse medical events, there is greater access to information about adverse medical events and increasingly widespread acceptance of the view that patient safety requires more than vigilance by well-intentioned medical professionals. In this essay, we describe some of the ways that medical liability insurance organizations contributed to this transformation, and we catalog the roles that those organizations play in promoting patient safety today. Whether liability insurance in fact discourages providers from improving safety or encourages them to protect patients from avoidable harms is an empirical question that a survey …

Financial Integration In The West African Monetary Zone: Towards A Single Insurance Market, Emmanuel Ating Onwioduokit

Bullion

integration of financial markets is a process of unifying markets and enabling convergence of risk-adjusted returns on the assets of comparable maturity across the markets. The insurance markets of the WAMZ countries are relatively not efficient. Although, there are several small insurance companies competing for premiums, only one company within the entire WAMZ region has a gross premium base more than $100 million. The paper recommends that the insurance sector integration 'quick wins should focus on: taking action to make the brown card scheme a more resounding success; increasing the minimum capital requirement of insurance companies in some of the …

Examining Moral Hazard In The Healthcare Insurance Market, Samuel Ashby

Honors College Theses

This study aims to examine the effect of insurance coverage on medical expenditure in the United States. The data was gathered from the Household Component Medical Expenditure Panel Survey and is a cross-sectional data set with a sample size of approximately 1500 observations. The study also distinguishes between public and private insurance coverage to compare the potential moral hazard in the two separate markets. The results of this study suggest that insurance status, specifically public, has a strong positive effect on healthcare expenditure. This result, combined with a negative relationship between household income and healthcare expenditure, suggests that the source …

The Pricing Impact Of The Decreasing Competitiveness Of The Health Insurance Market, Lauren N. Patterson

EURēCA: Exhibition of Undergraduate Research and Creative Achievement

The Affordable Care Act created the national insurance exchanges of qualified health plans to encourage a higher insured rate, larger risk pools, and lower prices for quality health coverage. Consolidation of insurers can have opposing effects. The insurers’ risk pools will grow, allowing insurers to better hedge for risk. However, consolidation decreases the prevalence of competition in the market, and past research shows that insurer consolidation decreases market competition and increases prices.

I examine how the number of plans offered in a set market, pricing components, and county health variables impact the monthly premium pricing of plans sold on the …

The Pricing Impact Of Decreasing Competitiveness Of The Health Insurance Market, Lauren N. Patterson

Chancellor’s Honors Program Projects

No abstract provided.

On Central Branch/Reinsurance Risk Networks: Exact Results And Heuristics, Florin Avram, Sooie-Hoe Loke

Mathematics Faculty Scholarship

Modeling the interactions between a reinsurer and several insurers, or between a central management branch (CB) and several subsidiary business branches, or between a coalition and its members, are fascinating problems, which suggest many interesting questions. Beyond two dimensions, one cannot expect exact answers. Occasionally, reductions to one dimension or heuristic simplifications yield explicit approximations, which may be useful for getting qualitative insights. In this paper, we study two such problems: the ruin problem for a two-dimensional CB network under a new mathematical model, and the problem of valuation of two-dimensional CB networks by optimal dividends. A common thread between …

Out-Of-Pocket Cost For Individuals Being Treated For Opioid Dependence In Rutland County, Vermont, Christopher T. Veal

Family Medicine Clerkship Student Projects

Each day more than 140 Americans die from drug overdoses, 91 specifically due to opioids. In Vermont, more than 50 people die each year from opioid poisoning. With insurance coverage being a critical component of Opioid Dependence Recovery, many people seeking treatment are unaware of the financial barriers to recovery- namely the out-of-pocket costs associated with treatment. This study sought to provide insight on the financial impact of Opioid Dependence Treatment on the patient, and provide financial assistance information to the Rutland County community.

Partitioning Sorted Sets: Overcoming Choice Overload While Maintaining Decision Quality, Benedict C.G. Dellaert, Tom Baker, Eric J. Johnson

All Faculty Scholarship

We investigate the joint use of partitioning and sorting as a choice architecture to overcome consumer choice overload in large product sets. Partitioning first presents a small initial set of alternatives with the option to click through to see the remaining alternatives. Sorting presents alternatives in order of attractiveness based on a user model that is helpful to the decision-maker. We propose that Sets with Partitioning and Sorting (SPSs) improve consumers’ choice outcomes by increasing their focus on the most attractive alternatives and their use of more compensatory decisions. Results from two controlled survey-based experiments and a field study in …

Transforming The Insurance Sector In Nigeriain Using The Fss 2020 Platform, Chris O. Muo

Bullion

The National lnsurance Commission (NAICOM) is the statutory Regulatory body of insurance business created to ensure the effective administration, supervision and regulation of insurance business and regulate transactions between insurers and reinsurers within and outside Nigeria. FSS 2020 Insurance Sector, in collaboration with NAICOM aims to deepen the insurance market; ensure lnsurance credibility and protect policy holders; Embed governance and risk management framework for the lnsurance Companies; Enhance access to finance (financial inclusion) with business development support and new products; and risk-based capitalization of lnsurance Companies.