Heterogeneous Selection in the Market for Private Supplemental Dental Insurance

Evidence from Germany

Jan Michael Bauer, Jörg Schiller, Christopher Schreckenberger

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This paper analyzes the German market for supplemental dental insurance to identify selection behavior based on individuals’ private information. The rather limited underwriting by German private health insurers makes this market especially prone to selection effects. Although the standard positive correlation test does not indicate asymmetric information in this market, we conjecture that this outcome may result from sample heterogeneity when adverse and advantageous selection occur simultaneously and offset each other. Examining a large set of potential sources of selection effects, we find mainly that the holding of other supplemental health insurance policies, which is related to risk preferences, contributes to an advantageous selection in this insurance market. Our results suggest that even in the absence of a positive correlation between risk and insurance coverage, the German market for supplemental dental insurance suffers from information asymmetry, which is caused by multidimensional private information.
Original languageEnglish
JournalEmpirical Economics
Number of pages27
ISSN0377-7332
DOIs
Publication statusPublished - 11 Feb 2019

Bibliographical note

Epub ahead of print. Published online: 11. February 2019

Keywords

  • Asymmetric information
  • Advantageous selection
  • Adverse selection
  • Dental insurance
  • Supplemental health insurance

Cite this

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title = "Heterogeneous Selection in the Market for Private Supplemental Dental Insurance: Evidence from Germany",
abstract = "This paper analyzes the German market for supplemental dental insurance to identify selection behavior based on individuals’ private information. The rather limited underwriting by German private health insurers makes this market especially prone to selection effects. Although the standard positive correlation test does not indicate asymmetric information in this market, we conjecture that this outcome may result from sample heterogeneity when adverse and advantageous selection occur simultaneously and offset each other. Examining a large set of potential sources of selection effects, we find mainly that the holding of other supplemental health insurance policies, which is related to risk preferences, contributes to an advantageous selection in this insurance market. Our results suggest that even in the absence of a positive correlation between risk and insurance coverage, the German market for supplemental dental insurance suffers from information asymmetry, which is caused by multidimensional private information.",
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Heterogeneous Selection in the Market for Private Supplemental Dental Insurance : Evidence from Germany. / Bauer, Jan Michael; Schiller, Jörg; Schreckenberger, Christopher.

In: Empirical Economics, 11.02.2019.

Research output: Contribution to journalJournal articleResearchpeer-review

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