ABSTRACT
This chapter addresses the utility gains or losses workers experience as a result of mandatory consumption of a fixed amount of coverage, at a fixed price, under the Dutch disability insurance program. It presents three core concepts that determine individually varying willingnesses to pay for the statutory amount of insurance - extent of damage covered, probability of damage, and risk attitude. The chapter outlines the Dutch disability insurance system and elaborates the simple expected utility model to incorporate the multi-period character of the disability risk. It describes measurement methods and data. Disability insurance seeks to protect workers from losing their earnings as a result of disablement. Under a social insurance scheme the consumption of disability insurance is legally mandated, premium rates are set by a pay-as-you-go system, and the amount of insurance is also legally established. Overall uniform rates Mandatory disability insurance with an overall uniform rate turns out to be gainful for over two thirds of the insured population.
