Our speaker will be Peter Zweifel (ETH Zurich).

He will give a talk on "Long-term care insurance: joint contracts for mitigating relational moral hazard".

The talk will take place at 15:00-16:00 in seminar room D4.4.008.

Abstract: Recently, joint long-term care (LTC) insurance policies covering two related individuals have become available. This contribution purports to find out whether they have the potential of mitigating relational moral hazard (RMH) effects. For decades, intra-family moral hazard has been suspected of being responsible for the sluggish development of private LTC insurance. The parent, anticipating the informal care provided by the child that has the effect of lowering expenditure on formal LTC, is tempted to buy less LTC coverage. The child (or more generally, the partner of a senior person), knowing that the bequest is protected by LTC insurance, has less incentive to provide informal care. Moreover, the amount of LTC coverage bought by the partner is found to fall in response to that of the senior person. Since a joint LTC policy makes senior and partner decide simultaneously rather than sequentially, it may lead to a partial internalization of RMH by turning the amounts of LTC coverage into strategic complements, the amount of coverage whereas the two amount of coverage purchased by the senior and opf informal care provided by the junior continue to be strategic substitutes.