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Cognitive abilities and long-term care insurance: evidence from European data

Gousia, Katerina (2021) Cognitive abilities and long-term care insurance: evidence from European data. The Geneva Papers on Risk and Insurance - Issues and Practice, . ISSN 1018-5895. E-ISSN 1468-0440. (doi:10.1057/s41288-021-00240-8) (KAR id:88194)

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Long-term care (LTC) is one of the largest financial risks faced by the elderly. Yet, it remainslargely uninsured. This paper explores the relationship between cognitive abilities and private voluntary or supplementary long-term care insurance (LTCI) ownership as another possible factor contributing to the small size of the market. We used data from a European panel survey, which collects detailed information on both private insurance coverage and three indicators of cognitive abilities: numeracy, verbal fluency and memory skills. We find that memory, but not numeracy or verbal fluency, has a positive and statistically significant effect on the probability of owning private LTCI above and beyond other characteristics such as general education, family, risk factors, income and wealth. Fixed effects estimates show that a one-standard deviation increase in the recall measure score is associated with a 0.5 percentage-point increase of the probability of holding insurance for the baseline sample and a 1 percentage-point increase among the younger cohort. The findings suggest that cognitive limitations in LTCI decision-making are likely to be linked to information processing skills and can be an important factor affecting the expansion of the market that need to be taken into consideration in policy design.

Item Type: Article
DOI/Identification number: 10.1057/s41288-021-00240-8
Uncontrolled keywords: long-term care, long-term care insurance, cognitive abilities, ageing
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Division for the Study of Law, Society and Social Justice > School of Social Policy, Sociology and Social Research
Depositing User: Katerina Gousia
Date Deposited: 17 May 2021 10:48 UTC
Last Modified: 15 Nov 2022 12:27 UTC
Resource URI: (The current URI for this page, for reference purposes)
Gousia, Katerina:
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