Journal of Economic Research (Tahghighat- E- Eghtesadi)

Journal of Economic Research (Tahghighat- E- Eghtesadi)

Factors Affecting Adverse Selection in Supplementary Health Insurance and Strategies to Reduce It (Case study of an Iranian Insurance Company)

Document Type : Research Paper

Authors
Esmaeel Safarzadeh 1
Mirhosein Mousavi 2
nasrin hozar moghadam 3
Marzieh Dehghani 4
1 Department of Economics/Faculty of Social Sciences and Economics/ Alzahra University/ Tehran/Iran
2 Associate Professor, alzahra University,
3 Assistant Professor, Insurance Research Institute (affiliated to the Central Insurance of the Islamic Republic of Iran), Tehran
4 MA Economics Graduate, alzahra University, Tehran
10.22059/jte.2021.326541.1008492
Abstract
Considering the position of supplementary health insurance in the insurance industry, it is important to address the problem of adverse selection as one of the effective factors for increasing the loss ratio in this industry. In this paper, the correlation model between individuals' risk appetite under the indemnity amount and coverage amount, insurance specifications, and insureds' demographic characteristics was used to identify potential variations and risk components that influence this phenomenon. The data used were taken from the 2019 group insured information of a selected insurance company. Due to the nature of the data, the Tobit regression method was used to estimate the model. The results show that the signs of the coefficients of the variables included in the model are as expected and statistically significant. In other words, the effective variables that determine to some extent the level of risk of the insured are directly related to the level of costs. Therefore, it is necessary to identify the components that influence the occurrence or increase of medical costs and take them into account when setting the premium rate.
JEL Classification: I13, D82, C34.
Keywords
Supplemental Health Insurance
Asymmetric Information
Adverse Selection
Tobit Regression
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  • Receive Date 02 July 2021
  • Revise Date 20 November 2021
  • Accept Date 09 March 2022