Chris Tonetti (GSB) will present:

"Late-in-Life Risks and the Under-Insurance Puzzle"

at 3pm on Wednesday, September 21, 2016 in 310 Silsby

Please sign up for a meeting, lunch, or dinner at:

https://docs.google.com/spreadsheets/d/1m6QqN5UUTJJl1-1iYxmEUBhyIfNjbREbZXQVYWnL7gU/edit?usp=sharing

Abstract

Individuals face significant late-in-life risks, including potential long-term care (LTC) needs. Yet they hold little corresponding insurance (LTCI). We investigate the degree to which a fundamental lack of interest and poor product features determine low LTCI holdings. We estimate a rich set of individual-level preferences and use a life-cycle model to find that better insurance would be far more widely held than are products in the market. We find that flaws in existing products provide only a partial explanation for this under-insurance puzzle, with analogous findings for the gap between estimated and actual annuity holdings. Our results derive from "strategic survey questions" that identify preferences as well as stated demand questions.