Peter Wakker
October 17, 2007
Abstract
“Improving Rational Insurance Decisions by Providing Clients with Risk Information”
In the Medicare Part D program for elderly introduced in the US on January 1, 2006, private insurance companies and health maintenance organizations (HMOs) have to compete to offer supplemental insurance. Clients now face a decision about the level of deductible to choose and about the possible buying of supplemental insurance. Thus, Winter et al. (PNAS, 2006) wrote: “If the market component of Medicare Part D is to be successful, in the sense that it provides choices that consumers want, and achieves the efficiencies it seeks, it will probably be necessary for Medicare, and advocacy organizations, to expand efforts to reach all consumers and provide them with information and assistance in making wise choices.”
Research with Dutch data can be helpful. In the Netherlands , the health insurance company “Zorg & Zekerheid” initiated a study into the needs for statistical information of its clients.
PURPOSE: Investigate if various forms of risk-information improve rational decisions and customer satisfaction.
METHOD: The willingness to take supplemental insurance (WTT) was measured from N-476 customers before and after the receipt of risk-information. Various characteristics, such as degree of risk aversion, were measured. Descriptive and psychological results will be reported elsewhere (Timmermann et al., in preparation). Here we analyse normative implications, i.e. to what extent do various forms of information improve rational decisions and social welfare.