Invitation to PhD defence
Karl Ove Aarbu will Thursday 18 November hold a trial lecture on a prescribed topic, and defend his thesis for the PhD degree at NHH.
16.11.2010 - Knut André Karlstad
Prescribed topic for the trial lecture:
Population aging and the corresponding changes in individual demand for insurance
Time of the trial lecture:
1315 - 1400 in Karl Borch's Auditorium, NHH
Title of the dissertation:
Empirical Essays on Risk Taking and Insurance
Time and place for the defence:
1515 - in Karl Borch's Auditorium, NHH
Members of the evaluation committee:
Professor Øyvind Anti Nilsen, NHH, chairperson
Professor Bruno Jullien, University of Toulouse
Professor Uwe Sunde, University of St. Gallen
Supervising committee:
Professor Fred Schroyen, NHH (principal supervisor)
Professor Frode Steen, NHH
The trial lecture and the defence will be public. The thesis will be available from: presse@nhh.no.
Abstract:
Risk is an integral part of life. Most people do not reflect too much about the different risks they face throughout the day or a week, maybe because all kinds of activities contain some risk and we are therefore used to it. Moreover, at least in modern societies, the fact that most of our activities and belongings are insured implies that the consequence of an adverse event is manageable. This thesis probes deeper into these issues.
The first chapter of the thesis maps the heterogeneity of risk aversion in the Norwegian population. This is the first study that explores the heterogeneity of risk preferences among Norwegians. Risk aversion is measured as the complement of the maximal relative downside income risk a person is willing to bear with 50 percent chance in return for a doubling of their income with 50 percent chance. The higher this fraction is, the more risk averse is the respondent. Observing for each respondent the range to which their fraction belongs, an ordered probit model is used to estimate the effects of socioeconomic characteristics on risk aversion.
Women are more risk averse than men, risk aversion increases with age, and people who are satisfied with their current life situation are significantly more risk averse than very satisfied and dissatisfied people. Under the assumption of constant relative risk-aversion preferences, the sample average for the coefficient of relative risk aversion is 3.9 with a standard deviation of 2.9, reflecting strong heterogeneity of risk preferences. A cardinal risk measure is imputed to every respondent. The likelihood of smoking, of working in the private sector, of assuming the role of a top manager, of working in a small firm, or of taking up a loan to finance a risky investment depends negatively on the imputed measure of risk aversion.
The second part addresses the demand for treatment insurance in Norway. In Scandinavia, the provision of health care services has been, almost entirely, the responsibility of the public health care system. However, in the last five to seven years there has been remarkable growth in the private health care market. These health care services are normally obtained through the purchase of treatment insurance. A theoretical model for insurance demand is developed.
This model identifies primary drivers for individual demand for treatment insurance. The model is brought to a survey data set that is combined with aggregate county data on treatment queues. The overall results indicate that public waiting lists affect the demand for privately bought insurance, while employer-provided insurance does not seem to be affected. Strong preference for treatment insurance is found among smokers and the self-employed. Finally, income is an important determinant of insurance demand.
The last part addresses asymmetric information in the home insurance market. In order to detect the existence of asymmetric information the so-called positive correlation test is applied to a dataset containing approximately 500 000 home insurance contracts. In addition to the standard formulations of the positive correlation test a new method that encompasses joint modelling of frequency and severity is estimated. The results from these formulations show that frequency of claims increases in cover while claim costs are independent of cover.
Asymmetric information may be driven by adverse selection or moral hazard. Through various test procedures it seems that the information problem is most likely driven by adverse selection. Risk aversion may have an effect of the results from the positive correlation test. Through detailed socioeconomic information proxies for risk aversion are constructed. These proxies turn out to be very important for understanding deductible choice but only marginally important for claim probability. The information problem increases when risk aversion is controlled for - indicating a small omitted variable bias in the positive correlation test.
On Monday 22 November Monica Mjøs Værholm will hold a trial lecture on a prescribed topic, and defend her thesis for the PhD degree at NHH.
Publisert: 19.11.2010
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