Perception of long-term care risk and insurance demand: an analysis based on the PATER survey.

Summary In the economic literature, many studies attempt to explain why individuals insure themselves so little against LTC. On the supply side, various possible obstacles to the development of the LTC insurance market have already been pointed out in the literature. Recent estimates show, however, that supply-side limitations are not sufficient to explain the slow development of the market: even if insurance were less expensive and the coverage offered more extensive, the majority of individuals would still not take out insurance. It is therefore necessary to look for explanations on the demand side of LTC insurance. This article aims to enrich the existing literature by empirically studying the role of risk perception in the decision to take out LTC insurance, based on direct observation of individual preferences (risk aversion, preference for the present) made possible by the 2012 wave of the "Preferences and Wealth in relation to Time and Risk" (PATER) survey. In addition to the effect of socio-demographic characteristics, the econometric estimates carried out highlight the role of individual preferences in LTC risk coverage behaviour. Preference for the present is thought to play an important role in the perception of LTC risk, while risk aversion explains the fact of insuring against this risk among those who envisage the possibility of one day being in a LTC situation.