Understanding the motivations of coastal residents to voluntarily purchase federal flood insurance

Federally-backed flood insurance is the primary mechanism by which residents in the United States (US) prepare for and recover from floods. While there is a growing literature on the general uptake of flood insurance, little work has been done to address the factors motivating residents to voluntarily buy and maintain federally-based insurance policies. We address this issue by conducting a survey of coastal residents in four localities in Texas and Florida. Based on survey responses, we quantitatively examine the factors influencing whether residents located outside of the 100-year floodplain obtain insurance policies when it is not required. Using two-sample t-tests and binary logistic regression analysis to control for multiple contextual and psychological variables, we statistically isolate the factors contributing most to the decision to purchase insurance. Our findings indicate that a resident located outside the 100-year floodplain who has voluntarily purchased federal flood insurance can be characterized, on average, as more highly educated, living in relatively expensive homes, and a long-time resident who thinks about flood hazard relatively infrequently but who, nonetheless, thinks flood insurance is relatively affordable. Unexpectedly, the physical proximity of a respondent to flood hazard areas makes little or no discernible difference in the decision to obtain flood insurance.     

The importance of LTC insurance for the retirement security of the baby boomers

Any discussion about the prospects of retirement security for the baby boomers must take into account the potentially devastating costs of future long-term care (LTC) services. Although the market for LTC insurance is growing, baby boomers' misperceptions about LTC persist, and the market for LTC insurance must be expanded. The author presents analysis showing that LTC insurance is affordable for the majority of workers, describes the current state of employer-sponsored LTC insurancebenefits and outlines policies to encourage LTC insurance.     

Lapses in long-term care insurance

About a quarter of long-term care insurance (LTCI) policy holders aged 65 let their policies lapse before death, forfeiting all benefits. We find that lapse rates are substantially higher among the cognitively impaired in the Health and Retirement Study. This generates a pernicious form of dynamic advantageous selection, as the cognitively impaired are more likely to use care. Simulations show that an inappropriately optimistic asset drawdown path further increases the individual welfare cost of unanticipated lapses. Meanwhile, we find evidence of a significant but very small role for either strategic or financial motives for lapsing.     

Social long-term care insurance and redistribution

We study the role of social long-term care (LTC) insurance when income taxation and private insurance markets are imperfect. Policy instruments include public provision of LTC as well as a subsidy on private insurance. The subsidy scheme may be linear or nonlinear. For the linear part we consider an arbitrary number of types, characterized by earnings and survival probabilities. In the nonlinear part, society consists of three types: poor, middle class and rich. The first type is too poor to provide for dependence; the middle class type purchases private insurance and the high income type is self-insured. The main questions are at what level LTC should be provided to the poor and whether it is desirable to subsidize private LTC for the middle class. Interestingly, the results are not totally similar under both linear and nonlinear schemes. First, whereas in the linear case a subsidy of private LTC insurance is desirable, it is not in the nonlinear case (at least at the margin). Second, the desirability of public provision of LTC services depends on the way the income tax is restricted. In the linear case, it may be desirable only if no demogrant (uniform lump-sum transfer) is available. In the nonlinear case, public provision is desirable when the income tax is sufficiently restricted. Specifically, this is the case when the income is subject only to a proportional payroll tax while the LTC reimbursement policy can be nonlinear.     

Using retirement planning software to assess Americans' preparedness for retirement: an update

This article is an update of a previous analysis of retirement planning software. In this updated analysis, the author uses data from the 1995 Survey of Consumer Finances along with statistical analysis of retirement software to examine whether consumers who follow the software retirement saving parameters are saving enough for retirement.     

构建我国老年护理保险制度研究

在中国已经进入老龄化社会的背景下,本文以探讨人口老龄化带来的最突出的问题———老人护理问题的解决为研究对象,运用数据分析、对比分析等实证方法,对世界各国解决老年护理问题所采取的方法和途径进行研究,提出我国应当借鉴国外经验,建立符合我国国情的老年护理保险制度。制度模式上以强制的社会性长期护理保险作为主要选择,同时鼓励并支持发展商业性护理保险,对于从社会保障机制和制度层面解决老年护理难题提供了新的思路。     

Understanding your retirement savings: How the recent economic recession changed advertising in retirement financial services

This study investigates how messages, creative strategies and advertising disclosures utilized by US retirement financial services (RFS) providers changed in response to the recent economic crisis. A content analysis examines a total of 1819 RFS print advertisements published in six national magazines during the period 2005–2009. Three significant findings emerge: (1) the recession led to a change in the use of informational message strategies over transformational message strategies, (2) there were significant differences in the use of message and creative strategies during the five-year period, and (3) the RFS providers increasingly adhered to governmental advertising disclosure guidelines concerning consumer financial welfare. Implications for financial services advertisers and public policymakers are addressed.     

Understanding your retirement savings: How the recent economic recession changed advertising in retirement financial services

This study investigates how messages, creative strategies and advertising disclosures utilized by US retirement financial services (RFS) providers changed in response to the recent economic crisis. A content analysis examines a total of 1819 RFS print advertisements published in six national magazines during the period 2005–2009. Three significant findings emerge: (1) the recession led to a change in the use of informational message strategies over transformational message strategies, (2) there were significant differences in the use of message and creative strategies during the five-year period, and (3) the RFS providers increasingly adhered to governmental advertising disclosure guidelines concerning consumer financial welfare. Implications for financial services advertisers and public policymakers are addressed.     

Product pricing and solvency capital requirements for long-term care insurance

This paper presents a comprehensive assessment of premiums, reserves and solvency capital requirements (SCRs) for long-term care (LTC) insurance policies using Activities of Daily Living and US data. We compare stand-alone policies, whole life insurance policies with LTC benefit riders (LTC insurance combined with whole life insurance), life care annuities (LTC insurance combined with annuities) and shared LTC insurance in terms of net premium cost and SCRs. Net premiums and best-estimate reserves for base LTC insurance policies are determined using Thiele’s differential equation. Product features such as the elimination period and the maximum benefit period are compared using a simulation-based model. We show how a maximum benefit period can reduce costs and risks for LTC insurance products. SCRs for longevity risk and disability risk are based on the Solvency II standard formula. We quantify the extent to which whole life insurance policies with LTC benefit riders and life care annuities provide lower SCRs than stand-alone LTC insurance policies.     

Uncertainty on survival probabilities and solvency capital requirement: application to long-term care insurance

In this paper, we focus on uncertainty issues on disabled lives survival probabilities of LTC insurance policyholders and its consequences on solvency capital requirement. Among the risks affecting long-term care portfolios, special attention is addressed to the table risk, i.e. the risk of unanticipated aggregate mortality, arising from the uncertainty in modeling LTC claimants survival law. The table risk can be thought as the risk of systematic deviations referring not only to a parameter risk but, as well, to any other sources leading to a misinterpretation of the life table resulting for example from an evolution of medical techniques or a change in rules of acceptance. In fine, the idea is to introduce the risk of systematic deviations arising from the uncertainty on the disabled lives death probabilities directly. We analyze the consequences of an error of appreciation on the disabled lives survival probabilities in terms of level of reserves and describe a framework in an Own Risk and Solvency Assessment perspective to measure the gap between the risk profile from the standard formula to the risk analysis specific to the organism.     

The importance of threat,strategy, and resource appraisals for long-term proactive risk management among forest owners in Sweden

In natural hazards management, it is important to understand what motivates people to act when they or their property are threatened by natural hazards. Despite the importance of both threat and coping appraisals for responses to threats, less is known about the relations between threat and coping appraisals when risk management is long term. The present study examined appraisals of threat (cognitive and emotional), personal resources (cost and self-efficacy), and strategies (response-efficacy) as predictors of proactive management responses (past behavior and future intention) among forest owners in Sweden by means of a questionnaire (n = 1482). A path analysis revealed that threat appraisals and response-efficacy were direct predictors of past risk management behavior and the intention to respond in the future. Appraisals of resources, including cost and self-efficacy, were indirectly – via forest susceptibility and threat appraisals – related to threat responses. Although the model displayed reasonable fit for both owners more and those less involved in forestry, the cognitive appraisals variable was not a significant predictor of responses among owners less involved in forestry. In the full sample, the examined model explained approximately 50% of the variance in threat appraisals, and 28 and 17% in future intention and past behavior, respectively. Theoretical implications for how threat and coping appraisals are related during long-term risk management, and practical implications for forest risk management, are discussed.     

Key points to consider in the design and delivery of group long-term care insurance services

Long-term care insurance is a rapidly growing form of risk protection that many employers are beginning to make available to employees and their family members. Benefits managers need to use care in navigating the not yet fully charted waters of this new field of group insurance.     

Redistribution by insurance market regulation: Analyzing a ban on gender-based retirement annuities

We illustrate how equilibrium screening models can be used to evaluate the economic consequences of insurance market regulation. We calibrate and solve a model of the United Kingdom's compulsory annuity market and examine the impact of gender-based pricing restrictions. We find that the endogenous adjustment of annuity contract menus in response to such restrictions can undo up to half of the redistribution from men to women that would occur with exogenous Social Security-like annuity contracts. Our findings indicate the importance of endogenous contract responses and illustrate the feasibility of employing theoretical insurance market equilibrium models for quantitative policy analysis.     

Framing the decision to buy long-term care insurance: losses and gains in the context of statistical and narrative evidence

Rational models have difficulty explaining low levels of demand for long-term care insurance. We posit that insurers have framed the need for insurance in a manner that unintentionally promotes risk-seeking behavior (i.e., high probability loss frame), and that alternative frames can better promote willingness to insure. We further posit that emotional frames are more effective than rational risk frames in promoting willingness to pay. Survey evidence supports these hypotheses: emotional narrative frames are associated with greatest willingness to pay, and the high probability loss frame was associated with among the lowest average amounts willing to pay.     

Seven myths of financial planning and baby boomer retirement

Myths are tales that combine fact and fiction. Commonly shared business myths help provide the foundation for underlying beliefs about what is important, what matters to the customer, and explain or justify business practices. While myths can be a means to structure information and knowledge, they can also be barrier to innovation in a changing market. The changing demographics in all industrialised markets and the coming retirement of the baby boom generation pose challenges to seven commonly accepted myths among financial planners about who customers are, what they want and the most effective ways to deliver service value. This paper examines these widely held ‘industry beliefs’ and suggests strategies that product developers and planners might consider to improve practice management and to grow new business in an ageing marketplace.     

HARI: Characteristics of a new defined lifestyle (DL) retirement planning product

Journal of Financial Services Marketing - Approximately 16% of the world's population lives in countries with some concept of a financial retirement plan. Of the remaining population, many do...     

Understanding the variables in planning infrastructure projects

When planning for an infrastructure renovation or expansion, hospital executives should ask five questions to guide the decision-making process: What is the best way to plan for infrastructure improvements? What funding options exist? What is the best way to manage risk? What outcomes should I expect from my investment? When complete, will my project support the intended use?     

Understanding price competition in the German motor insurance market

This paper analyzes price competition in the German motor insurance market since 1994 and looks for evidence to back up a claim frequently found in the trade literature—that there have been two recent price wars in this industry, the first in 1996–1999, the second in 2005–2006. In a first step, we analyze the development of the German motor insurance market and compare it to that of other property-liability lines of business. In a second step the applicability of price war definitions found in the marketing literature to the German motor insurance market is checked. In a third step, a comparison to reference cases from other industries, where price wars have been subject to academic analysis, is conducted to complement the analysis. We conclude that, contrary to reports in the trade literature, the periods of 1996–1999 and 2005–2006 should be considered as times of intense competition in the motor insurance industry, not as times of price war.     

The importance of risk and insurance teaching within the ARIA mission

The American Risk and Insurance Association (ARIA) is a scholarly association devoted to the study of and promotion of risk and insurance economics and has a history of innovative scholarship in fields that are vital to economic development and resiliency throughout the world. Association members have an equally important mission and history of passing along important knowledge to students and the risk professions. The Risk and Insurance Teaching Society (RITS) was established as part of the pedagogical and academic program roles of ARIA. This paper outlines the importance of pedagogy within business higher education and more specifically within the academic discipline of risk and insurance and the increasing role that RITS plays in pedagogical innovation and idea sharing among risk and insurance academics.