Department of Finance, Insurance and Real Estate
2325, de la Terrasse Street, Room 3648
Québec (Québec) G1V 0A6
Institutional Affiliation: Universite Laval
NBER Working Papers and Publications
|October 2017||Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection|
with Martin Boyer, Philippe De Donder, Marie-Louise Leroux, Pierre-Carl Michaud: w23918
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 objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developed by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insur...