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Can Life Insurance Affect The Propensity To Commit Suicide?


We have some research now about moral hazard. That's the idea that you might take more risks if you know that you will not suffer the consequences. Opponents of bank bailouts a few years ago worried about moral hazard for the bankers, for example. And it turns out there may be moral hazard involved when you buy insurance. NPR's social science correspondent Shankar Vedantam has been looking into this. Hi, Shankar.


INSKEEP: So what's wrong here?

VEDANTAM: Well, it has to do with the effects of life insurance, Steve. People get life insurance to protect their families. If they die during the term of the insurance policy, their families are going to be protected. Here's the question, though. If you tell people their families are going to be looked after once they die, is it possible that you slightly increase the propensity of some people to consider suicide? In other words, instead of telling themselves, I can't commit suicide because it would destroy my family, could they think, my family is going to be OK? And this idea is moral hazard. By protecting people against one consequence of suicide, is it possible that you increase the risk people will actually consider suicide?

INSKEEP: I suppose insurance companies have already perceived that possible moral hazard because they often include an exception for suicide. The family can't collect if you're found to have committed suicide.

VEDANTAM: That's right. Now, many policies do come with what's called this exemption for suicide, but here's the thing. The exemption period typically lasts a finite amount of time. So once you buy a policy, the exemption period typically lasts one year or two years or three years or four years. A team of researchers from South Korea, China and Japan asked how the length of this exemption period affects the suicide rate in different countries because different countries have different exemption periods for suicide.


VEDANTAM: They looked at a range of industrialized countries. And in a paper they published in the B.E. Journal of Economic Analysis and Policy, the economists find that the shorter the exemption period, the greater the demand for life insurance. And the greater the demand for life insurance, the higher the suicide rate.

INSKEEP: Wow. And this is a statistically significant difference, depending on whether it's just a one-year exemption or a four-year exemption.

VEDANTAM: That's absolutely right, Steve. It's worth pointing out, of course, that this is a correlation, so we can't say for sure that one thing is actually causing the other. This is the kind of situation, of course, where it would be unethical to conduct a randomized experiment to see who commits suicide. I think what we have here is a signal - you know, a canary in the coal mine, if you will. It needs more work to conclusively suggest a link. But given the seriousness of suicide as a public health problem, it's something policymakers might want to think about. It's not going to have a simple solution, Steve. You can't permanently exempt suicide from life insurance policies because suicide is so common that you want to protect families against the risk of suicide. On the other hand, the study's suggesting that the insurance itself might potentially increase the risk for suicide, and, of course, that's the definition of moral hazard.

INSKEEP: Shankar, thanks very much.

VEDANTAM: Thanks, Steve.

INSKEEP: That's NPR's Shankar Vedantam, who joins us to talk about social science research. He's also got a new podcast called Hidden Brain, where he explores how safety nets can change your behavior, among other ideas. Transcript provided by NPR, Copyright NPR.

Shankar Vedantam is the host and creator of Hidden Brain. The Hidden Brain podcast receives more than three million downloads per week. The Hidden Brain radio show is distributed by NPR and featured on nearly 400 public radio stations around the United States.