Private long-term care insurance ownership in a simple choice environment: Does financial literacy matter?

Publication Type

Journal Article

Publication Date

4-2023

Abstract

We present new evidence on financial literacy and private long-term care insurance (LTCI) ownership in Singapore, where policy intervention has resulted in a highly standardized marketplace with fixed benefit terms and premiums schedules. Using data from the 2018 Singapore Life Panel (N = 6,151), we document that almost half of the adults aged 50 and above in our large community-based sample have private LTCI coverage. We find that that financial literacy significantly increases LTCI demand, notwithstanding a simple choice environment where consumers cannot customize their policies. Furthermore, the importance of financial literacy was borne out through the knowledge aspect rather than financial skills/experience aspects; specifically, each financial knowledge question answered correctly increased the probability of LTCI ownership by 4.4% points on average. Tests for endogeneity between literacy and LTCI ownership reveal no endogeneity bias in the non-instrumented estimates. Overall, these findings underscore these importance of promoting financial education and literacy among consumers in LTCI markets, especially since financial knowledge is expected to play an even more salient role in markets with little or no product standardization.

Keywords

Aging, financial knowledge, insurance, long-term care financing, severe disability

Discipline

Finance and Financial Management | Sociology

Research Areas

Sociology

Publication

Journal of Aging and Social Policy

First Page

1

Last Page

19

ISSN

0895-9420

Identifier

10.1080/08959420.2023.2203601

Publisher

Taylor and Francis Group

Embargo Period

6-23-2023

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1080/08959420.2023.2203601

Link to Full Text

Share

COinS