Shang Wu, Hazel Bateman, Ralph Stevens, and Susan Thorp
We study the demand for income-indemnity long term care (LTC) insurance, a product that pays income in LTC states whether care services are used or not. We conduct an experimental survey where participants divide their (hypothetical) retirement savings between three products: a LTC income product, a life annuity and a liquid investment account.
Objective measures of exposure to LTC risk indicate little to no selection eects for the LTC income product. However subjective measures of exposure to LTC risk show that the LTC income product is more attractive to participants who perceive a higher risk that they will need LTC. This could either indicate adverse selection due to private information or subjective mis-measurement by participants of their future LTC costs.