Selected Published Journal Articles
Post, T., Grundl, H., Schmit, J., & Zimmer, A. (2014). The Impact of Investment Behavior for Individual Welfare: Evidence from the United States and Germany.
The industrialized world experiences a demographic shift that is straining public pension systems. Employer-sponsored pension plans change from defined benefit to defined contribution. More emphasis is put on individually managed retirement funds. One concern with this movement is the potential negative effect on individual welfare if households’ investment behavior is suboptimal. Using micro-level U.S. data, we compare the optimal utility computed using a life-cycle model with the actual utility as reflected in empirical asset allocation choices. Average estimated welfare costs estimated are below three percent of households’ endowment (assets and human capital); yet specific population groups experience higher welfare costs.
Eling, M., Schmit, J., & . (2012). Is there Market Discipline in the European Insurance Industry? An Analysis of the German Insurance Market.
Geneva Papers on Risk and Insurance
Economists often argue in favor of market discipline as a means to distribute resources effectively and efficiently (Flannery and Sorescu, 1996; Martinez Peria and Schmuckler, 2001). These same arguments likely influence decision makers as they incorporate market discipline as the third pillar of Solvency II, the European insurance regulatory scheme currently being implemented. Success for Solvency II, then, is dependent in part on the strength of influence found in market discipline. Our research indicates that the German insurance market demonstrates the existence of such discipline, although the actual effect appears smaller than previously found in the U.S. insurance market. Solvency II, therefore, seems to be following an appropriate path, although further research is needed to evaluate whether or not enhancements to market discipline within the European market are warranted.
(37), 180-207. doi: 10.1057/grir.2011.8.
Lei, Y., & Schmit, J. (2010). Influences of Organizational Structure and Diversification on Medical Malpractice Insurer Performance. Journal of Insurance Issues (33), 157-177.
Lei, Y., & Schmit, J. (2009). Influences on Organizational Form on Medical Malpractice Insurer Operations. Connecticut Insurance Law Journal
Kerr, D., Ma, Y., & Schmit, J. (2009). A Cross-National Study of Government Social Insurance as an Alternative to Tort Liability Compensation.
Journal of Risk and Insurance
Litigation rates in the United States have long been considered out of proportion with the remainder of the world, leading to a good deal of economic research trying to understand the causes. Much of that literature has focused on lawyer compensation rules and availability of general damage awards. Another possible reason for differences in national litigation rates is the relative generosity of government social programs. Using a sample of 24 countries over a 12-year period, we test the relationship between the size of government social program payments and liability costs as measured by liability insurance premiums, and find a strong negative relationship, controlling for income, accident rates, and a variety of other factors.
(76), 367-384. doi: 10.1111/j.1539-6975.2009.01303.x.
Doerpinghaus, H., Schmit, J., & Yeh, J. (2008). Age and Gender Effects on Auto Liability Insurance Payouts.
Journal of Risk and Insurance
We examine the relationship between claimant demographic characteristics (specifically, gender, age, and marital status) and the relative size of automobile third-party settlements. We present three possible theories to explain differences in payouts associated with gender and age: variations in risk attitudes, variations in negotiating costs, and discrimination. Results of empirical testing are consistent with differences in settlement amounts, particularly with respect to gender. These differences are examined and discussed along with suggestions for future research.
(75), 527-550. doi: 10.1111/j.1539-6975.2008.00273.x.
Browne, M., & Schmit, J. (2008). Litigation Patterns in Automobile Bodily Injury Claims 1977-1997. Journal of Risk and Insurance
(75), 83-100. doi: 10.1111/j.1539-6975.2007.00249.x.
Eling, M., Schmeister, H., & Schmit, J. (2007). The Solvency II Process: Overview and Critical Analysis. Risk Management and Insurance Review
(10), 69-85. doi: 10.1111/j.1540-6296.2007.00106.x.
Schmit, J. (2006). Factors that may influence tort litigation trends in the European Union. The Geneva Papers: Insurance Issues and Practices
(31), 304-313. doi: 10.1057/palgrave.gpp.2510075.
Doerpinghaus, H., Schmit, J., & Yeh, J. (2003). Personal Bias in Claims Settlement: An Example from Automobile Insurance,. Journal of Risk and Insurance
(70), 185-205. doi: 10.1111/1539-6975.00055.
Schmit, J., & Ma, Y. (2000). Factors Affecting the Relative Incidence of Uninsured Motorists Claims,. Journal of Risk and Insurance (67), 281-294.
Selected Submitted Journal Articles
Eling, M., Pradhan, S., & Schmit, J. (2013). The Determinants of Microinsurance Demand.
The Geneva Papers
The purpose of this article is to structure the extant knowledge on the determinants of microinsurance demand and to discuss unresolved questions that deserve future research. To achieve this outcome, we review the academic literature on microinsurance demand published between 2000 and early 2013. The review identifies 12 key factors affecting microinsurance demand: price, wealth, risk aversion, non-performance risk, trust and peer effects, religion, financial literacy, informal risk sharing, quality of service, risk exposure, age, and gender. We discuss the evidence of how each of these 12 factors influences demand, both within the microinsurance and the traditional insurance markets. A comparison with traditional markets shows an unexpected (negative) effect of risk aversion on microinsurance demand, with trust perhaps being the intervening factor. Other relevant results include the importance of liquidity (and/or access to credit), informal risk sharing, and peer effects on the decision to buy microinsurance. The influence of trust on insurance take-up and the unanticipated results for risk aversion are fertile areas for future research.
Gatzert, N., Schmit, J., & Kolb, A. (2013). Assessing the Risks of Insuring Reputation Risk.
Journal of Risk and Insurance
background of a fast growing extension of social media, its consideration by banking and insurance regulators, and its high relevance for organizational value. Insurers have only recently responded to this development by offering new reputation risk insurance solutions. The aim of this paper is to offer the first detailed academic analysis of these new policies, including examination of the risks insurers face in offering such coverage. We also offer the first conceptualization of reputation risk in an insurance and risk management context with focus on exposures, perils, and hazards. Our analysis indicates that loss identification and measurement seem to generate the greatest challenges to insurers currently providing reputation risk coverage. Thus, lack of experience as well as the complexity of the chain of reputation risk events related to reputation insurance coverage present insurers with significant challenges in making this a viable line of business.
Biener, C., Eling, M., & Schmit, J. (2013). Regulation in Microinsurance Markets: Principles, Practice, and Directions for Future Development.
Regulation of any market can either promote or impede its development, thus affecting social
welfare. In this paper, we are concerned with the impact of regulation in microinsurance
markets. We evaluate existing and potential regulatory mechanisms with regard to its
underlying economic rationale, and offer recommendations intended to enhance support and
minimize barriers for microinsurance market development. Specifically, we recommend
avoiding incentives for regulatory arbitrage; responding to the characteristics of the
microinsurance market, including licensing, capital, reinsurance, and distribution systems;
enhancing the market through financial literacy initiatives; and providing support in the form
of data collection and management training.
Kamiya, S., Schmit, J., & Rosenberg, M. (2012). Determinants of Insurers' Reputational Risk. Journal of Risk and Insurance
Schmit, J., & Ren, Y. (2012). A New Measure of Insurer Franchise Value. Risk Management and Insurance Review