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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Daniel Hedblom

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Working Papers

January 2010Asymmetric Information and the Demand for Voluntary Health Insurance in Europe
with Kristian Bolin, Anna Lindgren, Bjorn Lindgren: w15689
Several past studies have found health risk to be negatively correlated with the probability of voluntary health insurance. This is contrary to what one would expect from standard textbook models of adverse selection and moral hazard. The two most common explanations to the counter-intuitive result are either (1) that risk-aversion is correlated with health — i.e. that healthier individuals are also more risk-averse — or (2) that insurers are able to discriminate among customers based on observable health-risk characteristics. We revisited these arguments, using data from the Survey of Health, Ageing and Retirement in Europe (SHARE). Self-assessed health served as an indicator of risk: better health, lower risk. We did, indeed, observe a negative correlation between risk and insurance but ...

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