Displaced, disliked and misunderstood
A systematic review of the reasons for low uptake of long-term care insurance and life annuities
With aging populations, the role of private insurance in financing late-in-life risks is likely to grow. Yet, demand for long-term care insurance (LTCI) and life annuities (hereafter annuities) is very limited and lags behind economic projections. This systematic literature review surveys the large number of theoretical and empirical studies analyzing this contradiction. We examine the LTCI and annuity puzzles separately and show which factors limit demand for insurance against both late-in-life risks. Our systematic search rendered 3,945 unique hits and findings of 187 studies were integrated in our analyses. Results hereof suggest that holding of both insurance products is systematically impeded by substitution by social security, adverse selection, nonstandard preferences and limited rationality due to low financial literacy and risk unawareness. Furthermore, insurance holding is concentrated among wealthier and subjectively healthier individuals. A comprehensive approach addressing all four reasons for low uptake may increase insurance holding most effectively and may particularly empower people with lower socio-economic status to make well-informed decisions.
|Keywords||Long-term care, Annuities, Insurance, Decision making, Systematic review|
|JEL||Household Behavior and Family Economics: General (jel D10), Insurance; Insurance Companies (jel G22), Analysis of Health Care Markets (jel I11)|
|Persistent URL||dx.doi.org/10.1016/j.jeoa.2020.100236, hdl.handle.net/1765/125523|
|Journal||The Journal of the Economics of Ageing|
Lambregts, T.R, & Schut, F.T. (2020). Displaced, disliked and misunderstood. The Journal of the Economics of Ageing, 17, 1–28. doi:10.1016/j.jeoa.2020.100236