Asymmetric Information and Countermeasures in Early Twentieth-Century American Short-Term Disability Microinsurance

Abstract

American workers and employers a century ago formed microinsurance funds to provide sick pay to temporarily disabled workers. This article analyzes a 1908 survey of several hundred such microinsurers. Theoretically, a single cross-section may yield evidence of asymmetric information, but cannot enable the separation of moral hazard and adverse selection effects. However, microinsurance fund managers and outside observers believed they did see separate such effects and so microinsurers created separate countermeasures to mitigate these problems. This article finds prima facie evidence of asymmetric information and suggestive evidence of the separability of informational asymmetries and the effectiveness of such countermeasures.

Incentives That (Could Have) Saved Lives: Government Regulation of Accident Insurance Associations in Germany, 1884–1914

“…Our approach is also consistent with Murray (2011)'s assumption that workers' moral hazard is more severe in the case of sickness than in the case of accidents.…”

Development and Sustainability of Emerging Health Insurance Markets: Evidence from Microinsurance in Pakistan

“…In exchange for this 16 Ito and Kono (2010). 17 Murray (2011). 18 The Northern Area (NA) is now known as Gilgit-Baltistan (GB).…”

Government interventions in microinsurance: evidence from China

“…See also Bruggeman et al (2010) for a discussion on government intervention in catastrophe insurance. 11 Up to April 2020, Anhui (2009, 2014), Gansu (2008), Guangxi (2008), Guizhou (2013), Hebei (2009), Henan (2008, 2015, Jiangsu (2011), Jiangxi (2010), Jilin (2013, 2016), Inner Mongolia (2010), Ningxia (2009, 2011, 2012), Qinghai (2008), Shaanxi (2009, 2012, 2015, Shanxi , 2009), Sichuan (2009, 2011, 2016, 2017), Hubei (2015 and Zhejiang (2015) provinces have issued local regulations regarding the implementation of national microinsurance regulations within their own regions. 12 Data on the development of microinsurance across regions in China are not available.…”

“…empirically test this prediction and offer evidence of the feasibility of using risk-adjusted subsidies to achieve financial sustainability for micro health insurers in developing markets.18 For further information on the problem of under-insurance against losses resulting from public aid, seeCoate (1995).19 However, in such a case, ex post moral hazard is still possible. For instance, the insured may inflate the loss and avoid salvage after the hail storm occurs.20 See, among many others,Dror and Jacquier (2002),Brau et al (2011),Murray (2011) andBiener and Eling (2012).21 Problems of moral hazard and adverse selection in microinsurance have been addressed by many studies, for a review of these studies, seeBiener and Eling (2012).…”