Optimal long-term contracts with disability insurance under limited commitment

DOI10.1016/J.INSMATHECO.2022.02.007MaRDI QIDQ2138619zbMATH OpenOpenAlexFDO

Authors Kyoung Jin Choi, Junkee Jeon, Ho-Seok Lee, Hsuan-Chih Lin

Publication date 12 May 2022

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.insmatheco.2022.02.007

zbMATH Keywords

disability insurancedynamic contractingincentiveslimited commitmenttruth-telling

Mathematics Subject Classification ID

Contract theory (moral hazard, adverse selection) (91B41) Actuarial mathematics (91G05)

Review text

The paper focuses on an optimal long-term labor contract that provides disability insurance benefits in case the agent cannot commit to a long-term contract and the disability shock is private information. After describing the first-best contract, the study aims at modelling its technical characteristics and as well as its analytical treatment. Then the optimal contract is deepened with a view to the interpretation and practical application; the model presented is compared to existing practices of LTD insurances, Technical details and proofs are included in the appendix.

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Cites work

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Cited in

(5)

• Disability insurance in an optimal pension scheme
• Exploring the optimal design of an employer-sponsored sickness-disability compensation insurance plan when sickness presenteeism is penalized
• Optimal Disability Insurance with Moral Hazards: Absenteeism, Presenteeism, and Shirking
• Analytic approach for models of optimal retirement with disability risk
• Optimal long-term health insurance contracts: characterization, computation, and welfare effects

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