Long-Term Care Insurance: Information Frictions and Selection
Dr. Pierre-Carl Michaud
Professor in the Applied Economics Department of HEC Montréal
Pierre-Carl Michaud is a Professor in the Applied Economics Department of HEC Montréal. He holds the Research Chair in Intergenerational Economics, is the director of the Retirement and Savings Institute at HEC Montréal and a Research Associate of the NBER’s Aging Program. His research aims to understand life-cycle behaviour along a number of dimensions including savings, insurance and pensions, as well as health investments and the economic consequences of demographic change. He has received funding from numerous organizations for this work and his research has been published in top journals in economics, demography and public health. In 2018, he received the Marcel-Dagenais Award from the Société canadienne de science économique (SCSE) for his research.
About the presentation
We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated choice probabilities are used to predict market equilibrium for long-term care insurance. We find that information frictions are pervasive. We measure the welfare losses associated with these three causes in a framework that also allows for selection. We show that information frictions reduce equilibrium take-up and lead to large welfare loss while selection plays little role.
Panel Discussion: Following the seminar, there will be a panel of disciplinary scientists from neuroscience, management, economics, and computational sciences.