Moral Hazard and Claims Deterrence in Private Disability Insurance
Author(s)Duggan, Mark G.; Gruber, Jonathan; Autor, David H.
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Exploiting within-firm, over-time variation in plan parameters for nearly 10,000 Long Term Disability (LTD) policies held by US employers, we present the first empirical analysis of the determinants of private LTD spells. We find that a shorter waiting period and a higher replacement rate increase the incidence of LTD spells. Sixty percent of the latter effect is due to the mechanical censoring of shorter spells, with the remainder due to the deterrence of spells that would have continued beyond the waiting period. Deterrence is driven primarily by a reduction in the incidence of shorter duration spells and less severe disabilities.
DepartmentMassachusetts Institute of Technology. Department of Economics
American Economic Journal: Applied Economics
American Economic Association
Autor, David, Mark Duggan, and Jonathan Gruber. “Moral Hazard and Claims Deterrence in Private Disability Insurance.” American Economic Journal: Applied Economics 6, no. 4 (October 2014): 110–141. © 2014 American Economic Association
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