Working Paper: NBER ID: w9925
Authors: Mark V. Pauly; Kate H. Withers; Krupa Subramanianviswanathan; Jean Lemaire; John C. Hershey; Katrina Armstrong; David A. Asch
Abstract: This paper provides an empirical estimate of price' and risk' elasticities of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that the elasticity, in the range of -0.3 to -0.5, is sufficiently low that adverse selection in term life insurance is unlikely to lead to a death spiral and may not even lead to measured effects of adverse selection on total purchases.
Keywords: No keywords provided
JEL Codes: D1; D8; D11; D12; D80; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| premium price (D49) | demand for insurance (G52) |
| risk (D81) | demand for insurance (G52) |
| adverse selection (D82) | death spiral (G33) |
| asymmetric information (D82) | adverse selection (D82) |