This is a post-peer-review, pre-copyedit version of an article published in The Geneva Risk and Insurance Review. The definitive publisher-authenticated version Klimaviciute, J. Geneva Risk Insur Rev (2017) 42: 87. https://doi.org/10.1057/s10713-016-0018-8 is available online at: https://link.springer.com/article/10.1057/s10713-016-0018-8
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Abstract :
[en] Pauly (1990) argues that an explanation for the low long-term care (LTC) insurance demand could be intra-family moral hazard: parents might refuse to buy insurance since it reduces children’s incentives to provide care. This paper raises and explores the idea that the extent of intra-family moral hazard and non-purchase of LTC insurance might differ when insurance benefits are fixed and when they are proportional to LTC expenditures. It shows that fixed benefits limit and might even eliminate intra-family moral hazard, while the effect of proportional benefits is at best ambiguous. Consequently, non-purchase of insurance is less likely with fixed benefits.
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