Skip to content
Licensed Unlicensed Requires Authentication Published by De Gruyter January 23, 2018

Do Firms with Low Disability Risks Opt Out from Public to Private Insurance?

  • Wolter H.J. Hassink , Pierre Koning EMAIL logo and Wim Zwinkels


In the Netherlands, firms may opt out from public to private disability insurance (DI). Opponents of this “mixed market” for insurance argue that it may trigger a segmentation between firms with high risks with public insurance and low disability risks with private insurance. This article tests the importance of such risk segmentation, using administrative information on DI benefits and opting-out decisions of a panel of about 250,000 Dutch firms between 2007 and 2011. We find strong selection into private insurance of firms with low recent DI inflow rates and low current sickness rates. Accordingly, private insurers succeeded in attracting firms with low anticipated DI benefit costs in the first years to come. Our results also suggest that these effects are transitory – that is, firms that opted out have DI risks that are not structurally lower.


Bünnings, C., and H. Tauchmann. 2015. “Who Opts Out of Statutory Health Insurance? A Discrete Time Hazard Model for Germany.” Health Economics 24 (1):1331–1347.10.1002/hec.3091Search in Google Scholar

Burkhauser, R., M.C. Daly, D. McVicar, and R. Wilkins. 2014. “Disability Benefit Growth and Disability Reform in the US: Lessons from Other OECD Nations.” IZA Journal of Labor Policy 3:4.10.1186/2193-9004-3-4Search in Google Scholar

Butler, R.J. 1996. “Lost Injury Days: Moral Hazard Differences between Tort and Workers’ Compensation.” The Journal of Risk and Insurance 63 (3):405–433.10.2307/253619Search in Google Scholar

Chiappori, P.-A., and B. Salanié. 2000. “Testing for Asymmetric Information in Insurance Markets.” The Journal of Political Economy 108 (1):56–78.10.1086/262111Search in Google Scholar

Cohen, A., and P. Siegelman. 2010. “Testing for Adverse Selection in Insurance Markets.” The Journal of Risk and Insurance 77 (1):39–84.10.1111/j.1539-6975.2009.01337.xSearch in Google Scholar

Cuelenaere, B., W.S. Zwinkels, T.J. Veerman, and P.G.M. Molenaar-Cox. 2013. Ontwikkeling Hybride Financiering WGA, ASTRi Beleidsonderzoek En –Advies.Search in Google Scholar

De Meza, D., and D.C. Webb. 2001. “Advantageous Selection in Insurance Markets.” The RAND Journal of Economics 32 (2):249–262.10.2307/2696408Search in Google Scholar

Dionne, G., N. Fombaron, and N. Doherty. 2012. Adverse Selection in Insurance Contracting, Cahier De Recherché 12–31, CIRPEE.10.2139/ssrn.2132555Search in Google Scholar

Groot, N.D., and P. Koning. 2016. “Assessing the Effects of Disability Insurance Experience Rating. The Case of the Netherlands.” Labour Economics 41:304–317.10.1016/j.labeco.2016.05.007Search in Google Scholar

Grunow, M., and R. Nuscheler. 2014. “Public and Private Health Insurance in Germany: The Ignored Risk Selection Problem.” Health Economics 23 (6):670–687.10.1002/hec.2942Search in Google Scholar

Hyatt, D., and T. Thomason. 1998. Evidence on the Efficacy of Experience Rating in British Columbia. A Report to The Royal Commission on Workers’ Compensation in British Columbia.Search in Google Scholar

Koning, P. 2009. “Experience Rating and the Inflow into Disability Insurance.” De Economist 157 (3):315–335.10.1007/s10645-009-9125-6Search in Google Scholar

Koning, P., and M. Lindeboom. 2015. “The Rise and Fall of Disability Insurance Enrollment in the Netherlands.” Journal of Economic Perspectives 29 (2):151–172.10.1257/jep.29.2.151Search in Google Scholar

Kyyrä, T., and J. Tuomala. 2013. Does Experience Rating Reduce Disability Inflow? IZA Discussion Paper 7344.10.2139/ssrn.2284656Search in Google Scholar

Morantz, A. 2010. “Opting Out of Workers’ Compensation in Texas: A Survey of Large, Multistate Non-Subscribers.” In Regulation Vs. Litigation: Perspectives from Economics and Law, ed D. Kessler. Cambridge, MA: National Bureau of Economic Research.Search in Google Scholar

Panthöfer, S. 2016. “Risk Selection Under Public Health Insurance With Opt-Out.” Health Economics 25 (9):1163–1181.10.1002/hec.3351Search in Google Scholar

Rothschild, M., and J. Stiglitz. 1976. “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Competition.” The Quarterly Journal of Economics 90 (4):629–649.10.2307/1885326Search in Google Scholar

Shellhorn, M. 2001. “The Effect of Variable Health Insurance Demand for Physician Visits.” Health Economics 10 (4):441–456.10.1002/hec.630Search in Google Scholar

Timmer, K. 2014. Developments in the Hybrid Market for the Dutch Reintegration Scheme for the Partially Capable, mimeo.Search in Google Scholar

Tompa, E., K. Cullen, and C. McLeod. 2012. “Update on a Systematic Literature Review on the Behavioural Incentives of Experience Rating.” Policy and Practice in Health and Safety 10 (2):47–65.10.1080/14774003.2012.11667776Search in Google Scholar

Zwinkels, W., P. Brouwer, and A. Braat. 2006. Verzekerd van een effectieve prikkel : een verkennend onderzoek naar het effect van private uitvoering van de WGA, TNO rapport 22083/11381.Search in Google Scholar

We are indebted to two anonymous referees for their constructive comments on a previous version of the paper. Workshop participants at the Danish National Centre of Social Research in Copenhagen (4th November 2014), the meeting of the Centre for Research in Active Labour Market Policy Effects in Borkop (17-19th December 2014), the CPB Netherlands Bureau of Economic Policy Analysis (21st May 2015), Université Libre de Bruxelles (10th December 2015) and the Workshop on Absenteeism, Social Insurance and Retirement (Institute for Social Research, Oslo on 4th February 2016) are gratefully acknowledged for comments to the paper. In addition, we thank UWV for providing us access to the data.

Published Online: 2018-1-23

© 2018 Walter de Gruyter GmbH, Berlin/Boston

Downloaded on 29.5.2023 from
Scroll to top button