|Schuhmacher, Petra (2008): The Demand for Enhanced Annuities. Discussion Papers in Business Administration 2008-15|
This is the latest version of this item.
In enhanced annuities, the annuity payment depends on one's state of health at some contracted date while in "standard annuities", it does not. The focus of this paper is on an annuity market where "standard" and enhanced annuities areoffered simultaneously. When all insured know equally well on their future health status either enhanced annuities drive standard annuities out of the market or vice versa. Both annuity types can exist simultaneously when the insured know varying exactly on their risk type. In the case of the existence of such an "interior" solution, its is derived that this solution must be unique in the case of risk averse insured and that it Pareto-dominates the corner solution. Finally, it is shown that in all cases where at least part of the insured buy enhanced annuities social welfare is reduced.
|Item Type:||Paper (Discussion Paper)|
|Keywords:||annuitization, health status, enhanced annuities|
|Collections:||Munich School of Management|
Munich School of Management > Discussion Papers
Munich School of Management > Discussion Papers > Risk & Insurance
|Subjects:||300 Social sciences > 300 Social sciences, sociology and anthropology|
300 Social sciences > 330 Economics
|JEL Classification:||D14, D61, G11, G23|
|Deposited On:||04. Dec 2008 08:55|
|Last Modified:||27. Nov 2013 12:07|
Abel, A. and M. Warshawsky (1988): Specications of the Joy of Giving: Insights from Altruism, in: Review of Economics and Statistics, 70, 145-149.
Akerlof, G.A. (1970): The Market for Lemons: Qualitative Uncertainty and the Market Mechanism, in: The Quarterly Journal of Economics, 84, 488-500.
Ainslie, R. (2000): Annuity and Insurance Products for Impaired Lives, Working Paper presented to the Staple Inn Actuarial Society.
Brown, J. (2001): Private Pension, Mortality Risk and the Decision to Annuitize, in: Journal of Public Economics, 82, 29-62.
Brown, J., Davido, T., and P. Diamond (2005): Annuities and Individual Welfare, in: American Economic Review, 95, 1573-1590.
Brown, J. and P. Orszag (2006): Government-Issued Longevity Bonds, in: Journal of Risk and Insurance, 73, 611-631.
Bond, E. and K. Crocker (1991): Smoking, skydiving and knitting: the endogenous categorization of risk in insurance markets with asymmetric information, Journal of Political Economy, 99, 177-200.
Bruigivani, A. (1993): Uncertainty Resolution and the Timing of Annuity Purchases, in: Journal of Public Economics, Vol. 50(1), 31-62.
Doherty, N. and P. Thistle (1996): Adverse selection with endogenous information in insurance markets, in: Journal of Public Economics, 63, 83-102.
Dushi, I. and A. Webb (2004): Annuitization: Keeping your Options Open, in: Center for Retirement Research at Boston College Working Paper 2004-04.
Eichenbaum, M.S and D. Peled (1987): Capital accumulation and Annuities in an Adverse Selection Economy, in: Journal of Political Economy, 95, 334-354.
Finkelstein, A., and J. Poterba (2004): Adverse Selection in Insurance Markets. Evidence from the UK Annuity Market, in: Journal of Political Economy, 112, 183-208.
Friedman, B. and M. Warshawsky (1990): The Cost of Annuities: Implications for Saving Behaviour and Bequest, in: Quarterly Journal of Economics, 105, 135-154.
Hoermann, G. and J. Russ (2008): Enhanced Annuities, Individual Underwriting, and Adverse Selection - A Solution for the Annuity Puzzle?, forthcoming in: Insurance: Mathematics and Economics, Vol. 42.
Kifmann, M. (2008): The Design of Pension Pay Out Options when the Health Status during Retirement is Uncertain, in: CESifo Working Paper, Vol. 2211.
Mitchell, O., Poterba, J.M., Warshawsky, M.J. and J. R. Brown (1999): New Evidence on the Money's Worth of Individual Annuities, in: American Economic Review, 89, 1299-1318.
Palmon, O. and A. Spivak (2007): Adverse selection and the market for annuities, in. GENEVA Risk and Insurance Review, 32, 37-59.
Richards, S. and G. Jones (2004): Financial aspects of longevity risk, Working Paper presented to the Staple Inn Actuarial Society.
Rothschild, M. and J. Stiglitz (1976): Equilibrium in Competitive Insurance Markets, in: Quaterly Journal of Economics, 95, 629-649.
Shesinski, E. (2007): Optimum and Risk-Class Pricing of Annuities, in: Economic Journal, 117, 240-251.
Skinner, J. (1988): Risky Income, Life Cycle Consumption, and Precautionary Savings, in: Journal of Monetary Economics, Vol. 22(2), 237-255.
Warshawsky, M.l. (1988): Private Annuity Markets in the United States: 1919-1984, in: Journal of Risk and lnsurance, 55, 518-528.
Weinert, T. (2006): Enhanced Annuities on the Move, in: Hannover Re's Perspectives - Current Topics of International Life Insurance, 13.
Wilson, C. (1977): A Model of Insurance Markets with Incomplete Information, in: Journal of Economic Theory, 16, 167-207.
Yaari, M. E. (1965): Uncertain Lifetime, Life Insurance, and the Theory of the Consumer, in: The Review of Economic Studies, 32, 137-150.
Available Versions of this Item
- The Demand for Enhanced Annuities. (deposited 04. Dec 2008 08:55) [Currently Displayed]