Insurance Search and Switching Behavior
Jonneke Bolhaar
Maarten Lindeboom
Bas van der KlaauwSeptember 2009
Abstract
This paper looks into the search behavior of consumers in the
market for health insurance contracts. We consider the recent health
insurance reform in The Netherlands, where a private-public mix of insurance
provision was replaced by a system based on managed competition. Although
all insurers offer the same basic package (determined by the government),
there is substantial premium dispersion. We develop a consumer search model
containing the main features of the Dutch health insurance system. This
model provides us with a number of hypotheses, which we test using data from
the Dutch Health Care Consumer Panel. We find that the simple consumer
search model describes the choice for insurance coverage well, but fails in
explaining individual search decisions. We argue that search costs are
heterogeneous and related to knowledge about the system. In this case, group
contracts offered by insurers, might cause third-degree price discrimination
and reduce access to health care for some groups of individuals.
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Last updated: September 21, 2009.