4 - Private Markets for Life and Health Insurance

Summary

Chapter 4 chronicles the status quo and innovations in underwriting practices in the life insurance domain and shows how private markets deal with information problems and how they eagerly capitalize on novel ways – such as tracking devices – to mitigate asymmetric information. Using quantitative analysis, the chapter also shows that private life insurance markets are more developed in country-years with better information, but that partisanship mediates this relationship. Life insurance is an interesting domain to study because it has many parallels to health insurance, yet the former is mostly private, while the latter is mostly public. The chapter discusses the emergence of a supplementary private health insurance market, but it also documents the continued popularity of public solutions in areas where the time-inconsistency problem cannot be overcome by private actors.