|Title||Late-in-Life Risks and the Under-Insurance Puzzle|
|Year of Publication||2016|
|Authors||Ameriks, J, Briggs, JS, Caplin, A, Shapiro, MD, Tonetti, C|
|Series Title||NBER Working Paper Series|
|Document Number||Working Paper No. 22726|
|Institution||National Bureau of Economic Research|
|Keywords||Affordable Care Act, Health Insurance, Health Shocks, Medicare/Medicaid/Health Insurance, Older Adults, Risk Factors, Social Security|
Individuals face significant late-in-life risks, including needing long-term care (LTC). Yet, they hold little long-term care insurance (LTCI). Using both "strategic survey questions," which identify preferences, and stated demand questions, this paper investigates the degree to which a fundamental lack of interest and poor product features determine low LTCI holdings. It estimates a rich set of individual-level preferences and uses a life-cycle model to predict insurance demand, finding that better insurance would be far more widely held than are products in the market. Comparing stated and model-predicted demand shows that flaws in existing products provide a significant, but partial, explanation for this under-insurance puzzle.