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Recognition of Cancer Risk and Consumption of Cancer Insurance-Possibility of Adverse Selection-

  • Journal of Insurance and Finance
  • 2014, 25(4), pp.35-62
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

김대환 1

1동아대학교 경제학과

Accredited

ABSTRACT

People tend to depend on the cancer insurance, provided by the insurers since burdens of high medical costs and risk of losing a job, caused by high cancer morality and prevalence rage. Although the market size of cancer insurance has increased rapidly, the insurers have stopped providing the cancer insurance due to the high loss ration. It has been implicitly concluded that the high loss ratio in the cancer insurance is caused by the high cancer prevalence rate and active examination of the cancer without definite studies. As indicated by the results with theoretical analyses, the loss ratio could be higher than the potential loss ratio expected by the insurers if there exists adverse selection caused by the asymmetric information between the insured and insurers about the potential insured’s health status. This study aims to investigate whether the potential insured apply their private information about the possibility of facing cancer diseases for consuming a cancer insurance. In order to investigate empirically the behaviors of the potential insured, it is essential to control the endogeneity such as selection bias using a panel data. The results from the propensity score matching analysis show that the high likelihood of getting cancer estimated based on the general population does not lead to consumption of cancer insurance. However, interestingly, the high likelihood of getting cancer estimated based on themselves leads to consumption of cancer insurance.

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