Abstract
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.
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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.
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