Demand for long-term care insurance : time preferences matter, risk preferences don't

Long-term care (LTC) is one of the largest expenditure risks the elderly in many countries, including the U.S., face. Despite a large private expenditure share, demand for private LTC insurance is low (< 20%). This pre-registered study investigates to what extent attitudes toward uncertainty (risk and ambiguity) and time preferences (impatience) can explain the low demand. Linking three surveys conducted on a sample that is representative of the U.S. population, I find that impatience reduces insurance demand, while attitudes toward uncertainty do not affect demand. The effect of impatience is sizable: on average, impatient subjects are 9 percentage points less likely to demand LTC insurance than their patient counterparts. The effect of impatience increases to 15 - 17 percentage points for subjects with strong risk exposure and subjects who believe that the insurance will actually pay out an indemnity in case of a (valid) claim. The effects of risk aversion and ambiguity aversion are close to 0 and statistically insignificant in all considered samples