Journal article
Examination of cross subsidies in the workers' compensation market
Journal of insurance regulation, Vol.15(2), p.256
12/01/1996
Abstract
A study investigates cross subsidy impact on price in the workers' compensation market, both segmented and in aggregate, after controlling for the effect of regulation, market structure, and economic influences in the market. The findings indicate that the residual market losses incurred during the previous period positively affect the premium to loss ratio in the voluntary market during the current period. For the study period, however, voluntary market insurers were allowed to transfer only 27.56% of their subsidy assessment to insureds in the form of rate increases. The residual market operating losses incurred during the current year are found to affect negatively the ratios in the residual and aggregate market. Additionally, the market operation is influenced by size of the residual market and the state fund. Evidence of moral hazard is also observed in those states with the indemnity cap greater than the average weekly wage. The findings indicate insurers are conservative underwriters for small employers, new businesses, and firms operating in certain hazardous businesses.
Details
- Title: Subtitle
- Examination of cross subsidies in the workers' compensation market
- Creators
- Wook KwonMartin Grace
- Resource Type
- Journal article
- Publication Details
- Journal of insurance regulation, Vol.15(2), p.256
- Publisher
- National Association of Insurance Commissioners
- ISSN
- 0736-248X
- Language
- English
- Date published
- 12/01/1996
- Academic Unit
- Finance
- Record Identifier
- 9984701247002771
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